Citigroup and FDIC save Wachovia

ByABC News
September 29, 2008, 10:46 PM

— -- All deposits in Wachovia are protected, even those with accounts in excess of the $100,000 FDIC insurance.

"Today's action will ensure seamless continuity of service from their bank and full protection for deposits," FDIC Chairman Sheila Bair said. "There will be no interruption in services, and bank customers should expect business as usual."

Citigroup will acquire most of Wachovia's assets and liabilities, but Wachovia will continue to own brokerage A.G. Edwards and investment manager Evergreen Investments. Charlotte-based Wachovia will also continue as a publicly traded company.

Concerns about Wachovia's financial health have hammered the company's share price. Friday, Wachovia closed at $10, off 81% from its 52-week high. By Monday's close, Wachovia had slumped to $1.84.

Wachovia's financial problems can be traced to its 2006, $24 billion acquisition of Golden West Financial. Wachovia inherited a deteriorating $122 billion portfolio of loans that let borrowers skip some payments. Wachovia posted a $9.1 billion loss for the second quarter, slashed its dividend and announced plans to cut 11,350 jobs, mostly in its mortgage business.

Havoc across the Atlantic

Wachovia may be the last big bank considered to be in immediate trouble, but fears continue to spread among the next-tier regional banks.

Havoc also reached across the Atlantic Monday, where Britain nationalized Bradford & Bingley, Britain's ninth-largest mortgage lender. It was the second U.K. bank to be taken on by the British government. Also, Belgium, the Netherlands and Luxembourg pumped $16.4 billion into Fortis to stabilize Belgium's largest financial services firm, taking on a 49% stake.

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