Citigroup to Buy Wachovia's Banking Operations

Citigroup will buy banking giant Wachovia in a deal brokered by the Federal Deposit Insurance Corp., the FDIC said Monday. The FDIC emphasized that Wachovia didn't fail and that all depositors are protected. The transaction won't require any funds from the FDIC's deposit insurance fund, the agency said. The FDIC said it has entered into a loss-sharing arrangement on a pre-identified pool of loans under which Citigroup will absorb up to $42 billion of losses on a $312 billion pool of loans. Citigroup also will grant the FDIC $12 billion in preferred stock and warrants. Wachovia's financial problems stem from its acquisition of Golden West Financial in 2006 for roughly $25 billion. With that purchase, Wachovia inherited a deteriorating $122 billion portfolio of "pick-a-payment loans," which let borrowers skip some payments. Concerns about Wachovia's financial health have hammered the company's stock in recent days.