At least good news for taxpayers... CitiGroup has backed out of talks for Wachovia leaving the entire deal for Wells Fargo. I'm guessing that after more of the depth of bad debt came to light, it became more and more obvious that the deal just was not longer going to be in the best interest of CitiGroup's stockholders.
That was the good news, as long as...
All right, perhaps panic is too strong a word, but my goodness, it certainly does feel like one. The Dow Jones Industrial Average fell 5% today and is now down 30% since January 1. The S&P 500 is down 33.7% year to date and the NASDAQ is off 35.6%. This is indeed a bear market, but there is nothing rational about it whatsoever.
The sell off appears to be about nervousness investors are feeling about the future, the global economy, the bailout, corporate earnings. I try to keep a cool head, but the Dow is down 800 points in two days and even I wonder where it's going to end. Then I remember what Warren Buffet said...
After a weekend of back and forth, one judge's order to stop Wells and Wachovia from proceeding on Saturday, and appellate court overturning that order on Sunday, and a $60 Million CitiGroup (C) suit against both Wells Fargo (WFC) and Wachovia (WB), the three parties have agreed to a temporary halt to all litigation and discovery until Wednesday at noon.
Which just demonstrates the fallout that can be expected as the government (in this case, the FDIC) strong-arms companies to act, no matter how imprudently, to prevent the government from stepping in and (in this case) taking yet another bank into receivership.
It probably comes as no big surprise that Wells Fargo (WFC), one of the largest banking concerns in the US, well diversified in financial products across deposits, lending, credit cards, sales finance, and a smart mortgage originator, announced Friday that they had made a deal to purchase the entire Wachovia package for $15.4 Billion. The surprise comes with the fact it was five days late. The deal undercuts CitiGroup's (C) announced purchased of part of the Wachovia (WB) operation, and does what CitiGroup could not do: completes the deal without Federal Funding.
I was shocked when I heard, since Wells had originally participated in negotiations last weekend along with CitiGroup. Wells evidently was able to use the week, in which a contract had not yet been signed, to perform additional due diligence, and came up with an offer Thursday evening.
