Citigroup to Buy Wachovia, Backed by FDIC

Deal leaves three 'behemoths' in financial crisis
By Matt Cantor,  Newser User
Posted Sep 29, 2008 9:00 AM CDT
In this July 10, 2008 file photo, Wachovia Corp's CEO Robert Steel speaks during a news conference at the bank in Charlotte, N.C.    (AP Photo/Chuck Burton, file)
camera-icon View 1 more image

(Newser) – Citigroup will purchase struggling Wachovia’s banking operations in a $2.2-billion government-backed deal, the Wall Street Journal reports. The FDIC has agreed to take on a portion of potential losses in the plan, which leaves three banks, including Bank of America and JP Morgan Chase, in control of nearly a third of deposits nationwide, the Washington Post notes.

The deal was made under the auspices of the Federal Reserve and the Treasury department. It bolsters the flagging Citigroup, which was a key player in the credit crunch and saw its shares drop to $20 from $50 last year amid $40 billion in writedowns. The FDIC attempted to minimize any market fallout from the decision. “On the whole, the commercial banking system in the US remains well capitalized,” said its chairwoman.