Friday, October 3, 2008
At least somebody's making money
The U.S. economy may be going into recession or worse with the world economy sure to follow, but isn't reassuring that at least somebody has $16 billion to throw around? Today's subject, of course, is Wells Fargo & Co.'s $15 billion offer for Wachovia Corp., which everyone thought was about to be acquired by Citigroup Inc. with the backing of the Federal Deposit Insurance Corp. The surprise Wells bid came four days after Wachovia agreed to sell its banking assets to Citigroup for $2.2 billion provided the federal government guaranteed $312 billion in mortgages. The Wells bid does not require any government backing, according to the Reuters international news service. Citigroup's response was to demand that Wells drop its bid, saying it had an agreement from Wachovia not to negotiate with other parties. But Wells chairman Dick Kovacevich told Reuters he was "confident" that the deal would be approved by regulators, according to Reuters. Wells' offer includes Wachovia's brokerage, Wachovia Securities, and asset manager, Evergreen, while Citigroup also offered to buy Wachovia's banking assets. Citigroup's stock fell more than 18 percent, their biggest one-day drop since 1987, because analysts believed the Wachovia acquisition would have helped bolster Citigroup's branch network. But Wells also might be able to get support from the federal government through the $700 billion program approved by the House of Representatives on Friday, Reuters said. The offer is consistent with the rush by U.S. banks to acquire other banks, a cheaper way to acquire assets than borrowing during a credit crunch.