Wells Fargo Buys Wachovia

Wachovia (Charlotte, N. Carolina based banking corporation) and Wells Fargo & Co.(San Francisco California based) are the nation's 4th and 5th largest banks. As we all know, Wachovia is in the brink of its downfall and Citigroup came to a rescue and had agreed to buy Wachovia's banking operations for $2.2 billion at about $1 a share. This deal is brokered by federal regulators. The government then agreed to cover any losses above $42 billion in an effort to prevent Wachovia from failing.

But in a surprising announcement made on Friday, it stated that Wells Fargo & Co. had reached into an agreement to aquire Wachovia for about $15.1 billion in stock without any government assistance unlike Citigroup. This announcement came 4 days after Citigroup believed it had sealed the deal mentioned earlier.

Citigroup said that its agreement with Wachovia provides that the bank will not enter into any transaction with any party other than Citi or negotiate with anyone else and that entitles them to demanded that Wachovia call off its deal with Wells Fargo.

The Federal Reserve, which has regulatory oversight of the three big banks, said it hasn't had time to review the proposed sale of Wachovia to Wells Fargo but will work to ensure that all creditors and depositors of Wachovia are protected and assured that regulators will be working with Wachovia and Wells Fargo "to achieve an outcome that protects all Wachovia creditors, including depositors, insured and uninsured, and promotes market stability."