'Silent Run' Doomed Wachovia

Panic pushed FDIC to use unprecedented authority in Citigroup merger
By Drew Nelles,  Newser Staff
Posted Oct 2, 2008 4:32 PM CDT
In the latest byproduct of the widening global financial crisis, Citigroup Inc. acquired the banking operations of Wachovia Corp. in a deal facilitated by the Federal Deposit Insurance Corp.    (AP Photo)
camera-icon View 2 more images

(Newser) – Customers made a “silent run” on Wachovia as the North Carolina bank negotiated a buyout from Citigroup last week, the Charlotte Observer reports. Wachovia execs noticed customers withdrawing money from large accounts following Washington Mutual’s failure, lowering their balances to below the federally insured limit.

“The so-called silent run on the bank—it's real,” one executive says. “When Congress failed to pass the proposal, when WaMu collapsed, you could see the money flowing.” Citigroup agreed to buy Wachovia’s operations, with the Federal Deposit Insurance Corporation picking up any losses over $42 billion—part of the regulator’s unprecedented level of short-notice sale involvement that included consultation throughout the merger negotiations.