Citi vs Wells Fargo---Pig Fight!!!

With all the other economic drama going down this week here's one I haven't seen mentioned much on ATS. We all know that after WaMu failed last Thursday and was assumed by JPMChase, Wachovia (WB) was also on the ropes and through with .gov intervention was to be assumed by Cititgroup (C) with the .gov backstopping a certain level of losses.

Friday, while we were all pestering our Representatives to do the right thing and vote down the taxpayer bailout of the criminal enterprise known as the financial system, (you were e-mailing, faxing, and calling your Rep right?) and interesting development occured in regards to Wachovia. Wells Fargo (WFC) made an offer for Wachovia that was more beneficial to the WB shareholder and the taxpayer.

Source

However, C in the "too big to fail but might anyway" category. Claims to have had an ironclad deal with WB.

From AP via yahoo

Lawyers seem to have been busy over the weekend thus far.

from yahoo

Citi (NYSE:C - News) tonight was granted emergency injunctive relief extending the Exclusivity Agreement between Citi and Wachovia Corp. (NYSE:WB - News) until further order of the court.

Some interesting things are going on here. First the WB takeunder by C was backed by at least one part of the .gov with some backstops offered. The WFC offer was better for the WB shareholder than the C offer with no .gov backstop.

Some interesting speculation is coming out of this. Did the CEO of WB breach a contract with C to pump up his share price to unload as much stock as possible? Doesn't WB have a legal and fiduciary responsibillity to seek the outcome in the best interest of its shareholders? Is WFC trying whatever it can to get into that "too big to fail club", it does have alot of HELOC and other problem stuff on its books? Does the fact that WB was able to find a buyer (without a government backstop) say that the system isn't as frozen and in as much danger of collapse as many seem to think, and the bailout isn't necessary, therefore the deal must go through as originally planned? WFCs due dilligence seems to imply that the amount that the government is on the hook for with the C-WB deal is orders of magnitude larger than publicly stated. Will the FDIC sieze WB Monday give it to C and put the matter to rest?

Anyway, thanks for listening, I'd love to hear some thoughts about this. If I can't stop our elected representatives from pissing away my childrens future, I can at least have fun watching two pigs get dirty in the mud.




[edit on 5-10-2008 by jefwane]

reply to post by jefwane
Elites are most dangerous to each other when there are no checks on their power;they become power hungry and paranoid. Now they will turn on each other. There can be only be one!

All this is saying is there are *MINOR* hints of competitive bids reentering the system.

And that's a good thing.

JK

Yes, I was calling/emailing/faxing.
Even though we were all on the horn yelling at our elected officials, I think Thursday night most of us already knew the bailout would pass.

WFC likely knew as well, and in my opinion they went for the full buyout offer with that thought in mind. In what I believe is a combo of trying to become "too big to fail" and trying to get in a good position to unload the toxic debt via bailout bill while keeping W's other positive divisions, they put down an offer that was too good to refuse.

I think Friday's hearing will be interesting for exactly the reasons you mentioned - it's in the better interests on paper for WFC to buy W. Will the judge see that and agree with it?

What will be even more interesting is the 4 days of trading leading up to Friday. The shorts ban ends at 11:59pm Wednesday night, after all.