Wachovia may be split between Citigroup and Wells Fargo

October 6th, 2008 - 8:58 pm ICT by IANS  

New York, Oct 6 (IANS) The two warring suitors of Wachovia banking chain in the US - Citigroup and Wells Fargo - are being pressured by the federal government to reach a compromise, which may end up carving up the North Carolina-based bank, the Wall Street Journal (WSJ) newspaper has reported.The latest plan under discussion has Citigroup and Wells Fargo divide Wachovia’s network of 3,346 branches along geographic lines, with Citigroup getting branches in the northeast and mid-Atlantic regions and Wells Fargo taking those in the southeast and California, the daily said Monday quoting people familiar with the talks.

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

Unlike Citigroup’s original agreement to take over Wachovia’s banking assets, in which the Federal Deposit Insurance Corp agreed to shoulder potentially hundreds of billions of dollars in toxic loans, the plans being discussed Sunday do not entail either buyer receiving financial assistance from the US government, the WSJ said.

On Sep 29, Citigroup announced it would pay $2.16 billion for Wachovia stock and assume responsibility for $53 billion in its debt, under government watch.

But Friday, Wells Fargo elbowed its way into the bidding war and offered to buy it as an intact company for $15.4 billion.

Citigroup went to court claiming an exclusivity agreement with Wachovia. A New York state appeals court Sunday night reversed a lower-court ruling from the day before that had extended the expiration of that agreement to Friday from Monday.

But the legal tangle did not appear to derail the discussions about splitting up Wachovia, the newspaper said. Federal regulators and bankers are scrambling to quickly end the drama in part out of concern that Wachovia remaining in limbo could further frighten the already jittery investors and bank customers.

The negotiations were being led by senior Federal Reserve officials.

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