Stop the news machine I want to get off. Now it's Wells Fargo acquiring Wachovia - all of it - in a $15.1 billion deal. And unlike Wachovia's now-scrapped agreement with Citigroup, this one does not require government assistance and does not just cover Wachovia's banking operations. As for real-life ramifications, this can't be great news for local Wachovia employees. Wells Fargo has an extensive Socal banking network, so if this thing plays out like previous mergers, the banking giant might look for some significant consolidation of retail operations. A sale to Citigroup, which has a smaller presence in Socal, might have resulted in less dislocation. Meanwhile, the WSJ says the switcheroo will raise more questions about Citigroup's health.
The development is bad for Citigroup, as it highlights weak spots at the New York banking giant and challenges the notion that it has moved solidly from the problem category to the solution camp as the financial crisis unfolds. Citigroup's move to buy Wachovia's banking operations was widely seen as an effort to shore up its deposit base, which will now look less solid. Also, Wells Fargo is buying all of Wachovia without government help. That makes Citigroup's deal for only part of the company and need for Federal Deposit Insurance Corp. guarantees against losses on some problem loans look relatively paltry.
Here's the NYT story.
*There's chatter on CNBC about how Citi might consider legal action over the Wachovia withdrawal. Apparently, the Citi folks thought they had a done deal.