Citigroup agrees Wachovia buyout following bank failure

Just announced US bank Wachovia has been taken over by Citigroup the world’s biggest bank. America has yet again woken up to another huge troubled high Street bank being rescued.

Wachovia who held $312 billion loans that had a huge portfolio or high risk mortgages knows as ARMs has been helped by the Federal regulators to broke the deal allowing Citigroup to absorb $42 billion (£23 billion) of the losses.

The Federal Deposit Insurance Corporation (FDIC) will take any losses beyond Citigroup’s agreed liability in return for preferred stock for bearing risk valued at $12 billion under the deal.

Unlike Washington Mutual the FDIC stresses that Wachovia did not fail, the US bank suffered a run on deposits last week which lead to the authorities to seize them.

Read the full article in the Guardian