Sunday, October 12, 2008

Fed approves Wells Fargo's Wachovia buy

The Federal Reserve on Sunday gave its stamp of approval to the takeover of Wachovia Corp by Wells Fargo & Co of San Francisco, which had battled New York-based Citigroup for ownership of the wounded bank.

In an unusual Sunday afternoon announcement that appeared timed to precede the opening of shaky global financial markets, the Fed said it already had been in touch with the U.S. Department of Justice and banking regulators about the deal.

"Those agencies have indicated that they have no objection to the approval of the proposal," the Fed assured.

The fight between Wells Fargo and Citigroup over Wachovia, which is based in Charlotte, North Carolina, was acrimonious right up to the point when Citigroup finally backed out last Thursday.

It had drawn particular attention because it took place amid the frantic scramble by the U.S. government and regulators to devise ways for shoring up hard-pressed financial institutions, including through possible direct injections of capital into banks.

The Fed cited the "unusual and exigent circumstances affecting the financial markets, the weakened financial condition of Wachovia and all other facts" in its decision, saying it had shortened the usual notice period it generally gives regulators about such takeovers.

The deal could be completed in five days, the Fed said.

Wachovia was among the many regional banks that found itself in the grip of the credit crisis, holding large portfolios of toxic mortgages as the value of borrowers' homes dropped and they became unable to pay their loans.

After Citigroup dropped out last Thursday, the Fed said it would immediately begin considering Wells Fargo's bid for Wachovia and Sunday's approval came as little surprise.

No comments: