Citibank, Wells Fargo May Carve Up Wachovia, Feast On Its Bones

Bloomberg is reporting that Wells Fargo and Citibank may split Wachovia. Neither bank would get assistance from the government and taxpayers under the deal being discussed now.

“There is a point at which the FDIC will take Wachovia over if they are concerned about the stability of the bank,” said Christopher Whalen, managing director of Institutional Risk Analytics, an independent research firm in Torrance, California. “But as long as Citi and Wells will extend support to Wachovia, they have time.”

To end a legal skirmish, Citigroup may agree to take Wachovia’s branches in the northeast and mid-Atlantic regions, while Wells Fargo would get the Southeast and California branches, as well as Wachovia’s asset-management and brokerage units, the Wall Street Journal reported, citing people familiar with the situation.

Bank officials and FDIC spokesman David Barr declined to comment. Cable network CNBC reported that Citigroup was bidding for all of Wachovia. Citigroup spokeswoman Shannon Bell didn’t immediately return a call seeking comment.

A ruling over the weekend that said Citibank had the exclusive right to negotiate a takeover with Wachovia until Oct. 10 was overturned yesterday.

Wachovia is in trouble after acquiring a lender that was heavily invested in “pay-option” mortgages, a type of risky loan often given to people with good credit, but who are not required to provide documentation of their finances. “Pay-option” loans can actually grow in size because borrowers are allowed to pay less than the accruing interest.

Citigroup, Wells Fight May End by Splitting Wachovia (Update4)[Bloomberg]
(Photo: So Cal Metro )