Latest banking failure thread

[payxibka 10,045]

If it did not fail or was on the verge of failure then why did the FDIC need to broker a weekend deal? (emphasis added)

NEW YORK - In the latest byproduct of the widening global financial crisis, Citigroup Inc. will acquire the banking operations of Wachovia Corp. in a deal facilitated by the Federal Deposit Insurance Corp.

Citigroup will absorb up to $42 billion of losses in the deal, with the FDIC covering any remaining losses, the government agency said Monday. Citigroup also will grant the FDIC $12 billion in preferred stock and warrants.

The deal greatly expands Citigroup's retail outlets and leaves it among the U.S. banking industry's Big Three along with Bank of America Corp. and J.P. Morgan Chase & Co.

The deal comes after a fevered weekend courtship in which Citigroup and Wells Fargo & Co. both were reportedly studying the books of Wachovia, which was suffering from mounting mortgage losses linked to its ill-timed 2006 acquisition of mortgage lender Golden West Financial Corp.

The FDIC asserted that Wachovia didn't fail, and that all depositors are protected and there will be no cost to the Deposit Insurance Fund.

Federal Reserve Chairman Ben Bernanke, in a statement Monday, said he supports the "timely actions" taken by the FDIC "which demonstrate our government's unwavering commitment to financial and economic stability."

Treasury Secretary Henry Paulson also welcomed the sale of Wachovia to Citigroup, saying it would "mitigate potential market disruptions." Paulson said he agreed with the FDIC and the Fed that a "failure of Wachovia would have posed a systemic risk" to the nation's financial system.

"As I have said before, in this period of market stress, we are committed to taking all actions necessary to protect our financial system and our economy," Paulson said.

The sale of the Wachovia assets comes just days after the government's seizure of Seattle-based Washington Mutual Inc. — the largest bank failure in U.S. history. As details of its takeover unfolded, Wachovia shares plunged 91 percent in Monday premarket trading to 91 cents. The stock had closed Friday at $10, down 74 percent for the year.

Wachovia has been among the banks hardest hit by the ongoing crisis in the mortgage market. It paid roughly $25 billion for Golden West at the height of the nation's housing boom. With that purchase, Wachovia inherited a deteriorating $122 billion portfolio of Pick-A-Payment loans, Golden West's specialty, which let borrowers skip some payments.

http://news.yahoo.com/s/ap/20080929/ap_on_...TyVYYwOvBOs0NUE

[w¡n9Nµ7 §£@¥€r 123]

If it did not fail or was on the verge of failure then why did the FDIC need to broker a weekend deal? (emphasis added)

FDIC said it didn't fail. They never said it wasn't on the verge of failure, did they?

[jundp 191]

Scary sheet man.

[payxibka 10,045]

If it did not fail or was on the verge of failure then why did the FDIC need to broker a weekend deal? (emphasis added)

FDIC said it didn't fail. They never said it wasn't on the verge of failure, did they?

Wachovia has been reportedly on the FDIC "bad bank" list right after Indy Mac and WaMu...

If the bank was not "troubled" then there was no need for the FDIC to broker a deal and receive some remuneration (stock & warrants) for helping.

PS and FWIW.... I do not nor have I ever had any banking relationship with Wachovia...

Edited September 29, 2008 by payxibka

[SpiritAlight 1]

Anyone else getting the feeling that bigger forces (agenda) are at work here and have been put in place from years ago?

Flame on...hee, hee.

[thetreble 19]

Just a bunch of people out to make a couple of more bucks than they should have, flames.

[SpiritAlight 1]

Just a bunch of people out to make a couple of more bucks than they should have, flames.

Oh yes...the bottom line.

The thing is there is no such thing as enough!

sigh

[GiGii 4]

Citigroup will cover $42 billion of the $300billion in losses that Wachovia has. The rest will be left for the FDIC to cover.

What happens as all these banks fold and FDIC has to cover all these losses. Does this fall on us, like the $750billion rescue plan?

They already calculated that its over $10,000 per resident in the US to cover the rescue plan. What about all the rescues that FDIC does, who feels the pain of this, is it us again?

[Nikita2Charles 32]

Whose going to bail me us out with mortages payment whose not worth what we paid for a couple of years ago?

Go to the root cause of the problem, Those folks are not stupid but the greed factor is still there, give more to the wealthy, to those financial firms who got us in this mess in the 1st place. Why should our taxpayer goes out only to those financial firms, the Guy in charge of the Fed Bernakanbe... himself used to be CEO of Goldsack and and rack up a couple of millions just a couple of years ago.

They should revalue those loans to current market value to less people would default. One provision on the $700billion bailed out was for Bankrupcy judges to rewrite those loans for the person that went bankrupt but the banks and the administration voted against that part of the package, ALL FOR THE RICH and nothing in it for the MIDDLE CLASS.

Why not rewriting some of those loans so people that are in distress can actually afford it, not saying for everybody, just a couple of years ago, the banks were raking Billions in Profit, True people lot of homeowners bite more than they could chew but the bank played hand in hand with the situation

How many times, the appraiser from the banks ever came back and say, HEY THE HOUSE IS NOT WORTH THAT MUCH.

The more it's worth the higher loan amount, Higher profit. So now why should only the banks get bailed not the homeowners?

As more and more people stop making payments on houses that's not worth the current value, We are only seeing the beginning of it, IT"S NOT OVER YET. Until they go to the root cause of the mess

[GiGii 4]

Because it would be impossible to re-evaluate everyones mortgages fairly, it would be an even bigger mess.

This country is set up to help out the big boys... even as they fail, its the little guys that pick up the pieces and pay the price. It always was & always will be.

I dont even want to get into this... but, if you look at the cost of this stupid war, $12billion a month. How many problems do we have at home we could be helping/solving with that kind of money each and every month. The country spends money like water, cause it will just reprint some more and its all good.

[Dr. Obvious 49]

The acute nature of the market was on stark display Monday as financial institutions across the globe faced disaster:

Facing insolvency, Wachovia sold its banking operations to Citigroup, which took an immediate $42 billion loss, slashed its dividend and said it will seek to raise $10 billion in equity to offset the loss. The transaction was brokered by the FDIC, which received $12 billion of warrants in Citi in exchange for insuring the bank's losses won't exceed $42 billion.

The Belgium government bought 49% of Fortis, the nation's largest bank; the Netherlands and Luxembourg also participated in the deal. Fortis' near-death experience hit Hong Kong insurer Ping An, which owns a stake in the company.

UK regulators seized Bradford & Bingley, a big real estate financing company.

Hypo Real Estate, Germany's second-biggest commercial-real estate lender, received a 35 billion euro loan guarantee to prevent its insolvency.

Iceland bought 75% of Glitnir Bank, the nation's third-largest bank.

http://finance.yahoo.com/tech-ticker/artic...DJI,%5EGSPC,JPM

Worldwide financial crash and burn.

[Chica Yeyé 41]

Scary sheet man.

Yup. I am thinking about joining the WECU sister.

[Brad and Vika 129]

Just a bunch of people out to make a couple of more bucks than they should have, flames.

I think you are right. We have this situation every few years (S&Ls, derivatives, dot coms, etc.), and it usually gets back to some financial brainiacs that dream up a new way to make lots of money FAST. They find some unregulated area, or create something so complex (like subprime CIDs) that no one can figure out how to value for risk. Financial institutions panic, because they see competitors making huge profits, so they climb on the wagon too. Then it blows up, and the brainiacs - some any way - laugh their heads off while they escape most accountability. Nothing new here. Yes, I know, this is BIGGER than any crisis before. But markets are bigger, more integrated, and more highly valued than ever before too. We will be fine, in time.

[Brad and Vika 129]

The rest will be left for the FDIC to cover.

What happens as all these banks fold and FDIC has to cover all these losses. Does this fall on us, like the $750billion rescue plan?

They already calculated that its over $10,000 per resident in the US to cover the rescue plan. What about all the rescues that FDIC does, who feels the pain of this, is it us again?

Yes, and we already do support the FDIC, in a roundabout way. Hopefully the solution involves actual payment, rather than simply issuing more bonds.

[Brad and Vika 129]

Still no deal