Citi and Wells Fargo Battle over Wachovia

Citigroup and Wells Fargo Battle over Wachovia

 

The Battle over Wachovia escalated to a new level this weekend when Citigroup Inc. filed a lawsuit against Wells Fargo seeking more than $60 billion in damages for interference with the takeover of Wachovia’s banking operations.

The lawsuit that Citigroup filed on Monday is essentially due to Wachovia’s bad-faith breach of the banks’ contract.  The $60 billion suit is comprised of $20 billion in compensatory damages and more than $40 billion in punitive damages for “tortuous interference”.  

In hopes of avoiding a long costly legal battle, the Federal Reserve has become involved in order to help Wells Fargo and Citigroup come to an agreement over how Wachovia is to be split if at all.  With Wachovia draining assets and devaluing stock, it is essential that an agreement is made soon to help protect investors and clients alike.

One belief is that Wells Fargo and Citigroup will reach a compromise by splitting Wachovia Corp.’s network of 3,346 branches along geographic lines.  Although this may help bring harmony between the two banks, it is unsure what effect it will have on the average consumer.  Perhaps a diversification of Wachovia’s branches may cause some to lose faith in what was once one of the great financial powers of this nation.

Another worry about the proposed Citigroup takeover of Wachovia has to do with Wachovia’s integral component to Charlotte’s local economy.  It is believed that if New York based company Citigroup fully takes over Wachovia’s operations, that it will move its corporate offices taking with it hundreds of jobs.  The effect of such a transition would be extremely detrimental to Charlotte’s local economy which has grown and been partly established with the previous success of Wachovia’s banking and loan procedures. 

The turn of events which led to this arbitration between Wells Fargo and Citigroup In began early last week when Citi agreed to buy Wachovia’s banking assets for $2.1 billion in a deal that was worked out by the FDIC.  Throwing a wrench into the deal, Wells Fargo announced Friday that it would acquire Wachovia in a deal worth $15.1 billion.  Unlike Citigroup, Wells Fargo would not require the assistance of the Federal government to facilitate in the purchase.

It is unsure what affect this entire deal will have on the local home market.  With a slew of Preforeclosure Homes on a rise in the Charlotte Metro area, what is truly needed is a system in place that will help home owners on a local level regain their confidence in our monetary system and bring back a period of growth and not recession.