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Wachovia may be split between Citigroup, Wells Fargo: Report

Source: PTI
October 06, 2008 15:00 IST
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Carolina-based Wachovia might beĀ carved out between two suitors Citigroup and Wells Fargo -- under a solution being pressed by the United States government, a media report said on Monday.

In a sign that US officials are concerned about the increasingly volatile situation, the Wall Street Journal said, officials from the Federal Reserve were pushing hard for Citigroup and Wells Fargo to reach a compromise.

Under the leading plan being discussed on Sunday night, Citigroup and Wells Fargo would divvy up Wachovia's network of 3,346 branches along geographic lines, with Citigroup getting Wachovia's branches in the northeast and mid-Atlantic regions and Wells Fargo taking those in the Southeast and California, the paper said, citing people familiar with the talks.

Wells Fargo would take over Wachovia's asset-management and brokerage units.

But unlike Citigroup's original agreement to take over Wachovia, in which the Federal Deposit Insurance Corp agreed to shoulder potentially hundreds of billions of dollars in toxic loans, the plans being discussed Sunday night don't entail either buyer receiving financial assistance from the US government, WSJ said quoting an unidentified person briefed on the talks.

Regulators and bankers, it said, are scrambling to quickly end the drama in part out of concern that if Wachovia remains in limbo when US markets open Monday morning, it could further spook already jittery investors and bank customers.

Hoping to increase the likelihood that an agreement will be reached, Wachovia was excluded from the weekend talks.

Even as negotiations to split up Wachovia were proceeding, the Journal noted, lawyers for Wachovia and Citigroup were sparring in federal court in New York on Sunday afternoon.

The wrangling followed a Saturday night ruling by a state-court judge that extended the expiration of Citigroup's agreement until Friday.

Wachovia asked a US District Court judge to decide whether Wachovia had the right to renege on Citigroup's
tentative agreement to buy Wachovia's banking business forĀ $2.1 billion.

A follow-up hearing was set for Tuesday.

The weekend negotiations, WSJ said, were being led by senior Federal Reserve officials.

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