Wednesday, October 8, 2008

Citigroup and Wells Fargo are fighting over Wachovia

Last week on the news Citigroup was said to be buying Wachovia with the help of the U.S. government. Citigroup had agreed to buy Wachovia's assets for $2.1 billion in a deal which was brokered by the Federal Deposit Insurance Corp. But, then on Friday, Wells Fargo upped the offer by saying they'd buy Wachovia for $15.1 billion and the deal would not require any government support.

This lead Citigroup and Wells Fargo into both state and federal court this weekend in a battle over Wachovia.

Citigroup sued Wachovia, Wells Fargo, and the directors of both companies for interfering with their planned takeover of Wachovia. They're seeking more than $60 billion in damages. The complaint says it's seeking more than $20 billion in compensatory damages and more than $40 billion in punitive damages from Wells Fargo for tortious interference.

Well now new reports are stating that Citigroup, Wachovia, and Wells Fargo have all agreed to a standstill of all formal litigation while a decision is trying to be reached regarding the fate of Wachovia. The standstill agreement will end at noon this Wednesday, unless it gets extended.

Citigroup spokesman Michael Hanrettasaid in a statement, "We are pleased to participate with the Federal Reserve Board in a fair-minded, good faith process to achieve a prompt and successful outcome."

Frederick Cannon, an analyst at Keefe, Bruyette & Woods, said, "If this goes into a protracted legal battle, everybody loses. Wachovia is big enough that it would be a negative for the financial system. Given that situation, we will see a resolution pretty quickly."

For me, I really don't know what to expect from all these buying activities on the market. Does it help the economy or will it lead to the problem of oligopolies?

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