Wachovia Latest Bank to Be Bought Out by Citigroup

According to Citigroup to buy Wachovia banking operations Wachovia is the latest bank to go under. FDIC will facilitate a deal with Citigroup Inc to buy out Wachovia. Citigroup absorbs up to $42 billion of losses and the FDIC will cover the rest. Citigroup also gives the FDIC $12 billion in preferred stock and warrants.

The deal will make Citigroup one of the big three along with Bank of America Corp. and JP Morgan Chase and Co. This weekend Citigroup and Wells Fargo both studied Wachovia's books. The FDIC reported that Wachovia didn't fail and all deposits are protected and the FDIC did not incur any cost.

FDIC stepped in, so Wachovia would not fail. The strategic plan is to demonstrate the FDIC's commitment to financial and economic stability. A failure to Wachovia could have posed a risk to the nation's financial system. As details of Washington Mutual's seizure and sale became public Wachovia's stocks plummeted. The stock closed Friday at $10.

Wachovia was one of the hardest hit by the ongoing mortgage crisis. In 2006 Wachovia purchased Golden West for $25 billion. Wachovia then inherited $122 billion portfolio of shady loans. The loans were called Pick a Payment loans, which was one of Golden West's specialties, and it let borrowers skip some payments.

With untimely decisions based on greed another bank is caught up in the mortgage crisis.