Citigroup buys Wachovia

Or to be clear, the banking operations of Wachovia. Here's another case of an out-of-state bank that in retrospect was too eager to expand into California. Wachovia, which is being acquired by Citi in a deal involving FDIC intervention, was badly hurt by its 2006 purchase of Golden West Financial, the parent of World Savings. What the banking company inherited was a ton of suspect mortgages from Golden West - specifically adjustable-rate mortgages that allowed certain borrowers to pay what they wanted each month. Citigroup does not have a large retail presence in Socal, so the acquisition is not likely to have a big impact on local branch closures. Until just a few hours ago, it appeared as if Wells Fargo was ready to acquire Wachovia in a deal that would have had more local impact. Here's the FDIC press release and here's the NYT story. From the Times:

Citigroup will pay $1 a share, or about $2.2 billion, according to people briefed on the deal. The F.D.I.C. said that the agency would absorb losses from Wachovia above $42 billion and that it would receive $12 billion in preferred stock and warrants from Citigroup in return for assuming that risk. “Wachovia did not fail,” the F.D.I.C. said, “rather it is to be acquired by Citigroup Inc. on an open-bank basis with assistance from the F.D.I.C.”