Suitors joust to rescue Wachovia
Wachovia has billions of dollars in toxic mortgage debt, which Wells Fargo wants to buy. But Citigroup says it's got first dibs, and Warren Buffett is in on the action too. Janet Babin sorts it out.
A man passes by a Wachovia Bank branch October 2, 2008 in Washington, D.C. (Karen Bleier/AFP/Getty Images)
More on The Economy, Wall Street, America's Financial Crisis
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Kai Ryssdal: Five short days ago you could've bought one of the banks at the heart of the subprime mess for a relative song. Wachovia has billions of dollars in lousy mortgage debt on its books. But literally overnight it's become a hot property. From North Carolina Public Radio, Marketplace's Janet Babin reports.
Janet Babin: Wells Fargo offered more than $15 billion for Wachovia today. There's just one problem. Citigroup claims it already had a deal to buy Wachovia's banking operations for just over $2 billion. At that price, Wachovia shares would be worth about $1. Wachovia shareholders, like Mark Beck, were outraged by the deal. So he started WachoviaVoteNo.com. It's had more than 100,000 hits.
Mark Beck: The Web site was a gathering place for just a complete shareholder revolt.
Angry shareholders say Wachovia's worth more, even with all its toxic assets. Christopher Whalen is managing director at Institutional Risk Analytics. He says the dueling offers might mean the government should rethink the bailout plan.
Christopher Whalen: I think it's demonstrated that there is a private market out there that cares about these assets very much.
That includes superstar investor Warren Buffett, the largest owner of Wells Fargo stock. He's been scooping up financial stocks at bargain prices. Robert Hegarty is managing director at Tower Group.
Robert Hegarty: He's an active investor and he understands the financial markets better than most investors do.
Citi says it may sue to force its deal. But Whalen says, bad idea. That's because the FDIC is involved. Under the Citi deal, the government agreed to take on some of Wachovia's debt.
Whalen: If I were the Citi guys, I'd think about all this before I started engaging lawyers. They can't sue the FDIC.
The FDIC said today, it stands behind Wachovia's original deal with Citigroup.
I'm Janet Babin for Marketplace.
Comments
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From landis, NC, 10/09/2008
i think it is a crying shame that 21000 hard working people has made this company what it is in 5 years and in only a few weeks the news media and the judges and lawyers have almost run the co. name in the mud lets go guys if wells wants us wiyh no government or tax payer help lets do this deal and get back to business
From TX, 10/03/2008
This is unfortunate. Now, the big banks are fighting each other in a break neck race to consolidate which is being done for business survival rather than business gain. Sadly, the bailout will not help them much. They are hurting and when they hurt, we all suffer. Everyone should start looking for ways to protect their money. This basically comes down to either taking your money out of the market and cutting discretionary spending or diversifying and investing some overseas. I personally use offshore bank accounts and they have helped me with diversification and asset protection. If you want to read more on why offshore investing is smarter, feel free to visit my website.
Best,
Frank Miller
http://www.theoffshorebankaccount.com
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