Another one bites the dust:
Citigroup has agreed to buy Wachovia’s banking operations in a government-brokered deal, a move that that would concentrate power within the nation’s banking industry in the hands of a few giant lenders, The New York Times’s Eric Dash and Andrew Ross Sorkin reported Monday morning.
As part of the deal, Citigroup will absorb up to $42 billion of losses on Wachovia’s $312 billion pool of loans — but the Federal Deposit Insurance Corporation will absorb losses beyond that. In return, the banking giant has given the FDIC $12 billion in preferred stock and warrants as compensation.
In a statement, the FDIC, which insures the nation’s retail bank deposits, emphasized that Wachovia did not fail and that the Deposit Insurance Fund would not be affected.
“For Wachovia customers, today’s action will ensure seamless continuity of service from their bank and full protection for all of their deposits,” FDIC Chairman Sheila C. Bair said in a statement. “There will be no interruption in services and bank customers should expect business as usual.”
The sale to Citigroup further concentrates Americans’ bank deposits in the hands of just three banks: Bank of America, JPMorgan Chase and Citigroup would control more than 30 percent of the industry’s deposits.
Together, those three would be so large that they would dominate the industry, with unrivaled power to set prices for their loans and services. Given their size and reach, the institutions would probably come under greater scrutiny from federal regulators. Some small and midsize banks, already under pressure, might have little choice but to seek suitors.
The talks intensified on Sunday after a weekend of tense negotiations in Washington over a $700 billion rescue for the banking industry, The Times said. Only days earlier, federal regulators seized and sold the nation’s largest savings and loan, Washington Mutual, in one of a series of important deals that have reshaped the financial landscape.
Something tells me it’s not done yet…..
October 3rd, 2008 at 9:24 am
[...] On Monday, Wachovia and CItigroup announced a merger deal that included financial aid from the FDIC. [...]