Citigroup to buy Wachovia branches, loans, deposits: FDIC

The Federal Deposit Insurance Corp. says Citigroup is buying Wachovia's banking operations. FDIC statement here. That will make New York-based Citigroup Philadelphia's dominant bank. The Wachovia Center might (not 'will') get a new name.

"Citigroup Inc. will acquire the bulk of Wachovia's assets and liabilities," including its bank branches, loans, deposits, and debt, says FDIC. Wachovia has over 200 branches and 6,400 workers in the Philadelphia area. Citi has more than 2,000 workers, mostly in its Delaware credit card and tax shelter business, and 23 mostly brand new local bank branches, plus dozens of Citifinancial loan offices. Expect some duplicate offices to close.

"Wachovia Corporation will continue to own AG Edwards and Evergreen," its stock brokerage business.

Bailout Watch: "The FDIC has entered into a loss sharing arrangement on a pre-identified pool of loans." Translation: other banks, and ultimately consumers and business, may share in the cost of covering billions of dollars the bad home mortgages Wachovia bought on the West Coast in one of its ruinous merger deals.

Also, "Citigroup Inc. will absorb (the first) $42 billion of losses on a $312 billion pool of loans. The FDIC will absorb losses beyond that. Citigroup has granted the FDIC $12 billion in preferred stock and warrants to compensate the FDIC for bearing this risk."

FDIC's justification for socialing the cost of Wachovia's error: "In consultation with the President, the Secretary of the Treasury on the recommendation of the Federal Reserve and FDIC determined that open bank assistance was necessary to avoid serious adverse effects on economic conditions and financial stability."

And Don't Panic: "On the whole, the commercial banking system in the United States remains well capitalized. This morning's decision was made under extraordinary circumstances with significant consultation among the regulators and Treasury," Bair said. "This action was necessary to maintain confidence in the banking industry given current financial market conditions."