Banks agree to standstill
Trio aims to settle fate of Wachovia
NEW YORK - Wachovia, Citigroup, and Wells Fargo yesterday agreed to a standstill of all formal litigation activity - a sign that the banks and the Federal Reserve are working feverishly to reach an agreement over the fate of Wachovia.
The standstill agreement will end at noon tomorrow, unless extended.
"We are pleased to participate with the Federal Reserve Board in a fair-minded, good faith process to achieve a prompt and successful outcome," said Citigroup spokesman Michael Hanretta in an e-mail to the Associated Press.
Federal Reserve officials have been in talks with Wells Fargo and Citigroup in the hope of getting the parties to come to some sort of agreement, according to a person with knowledge of the talks. The person spoke on condition of anonymity because of the sensitive nature of the matter.
The Wall Street Journal reported yesterday that the discussions could result in the two suitors carving up Wachovia Corp.'s network of 3,346 branches along geographic lines, citing people familiar with the situation.
Early last week, New York-based Citigroup Inc. agreed to buy Wachovia's banking assets for $2.1 billion in a deal brokered by the Federal Deposit Insurance Corp. In a surprising twist of events, San Francisco bank Wells Fargo & Co. said Friday that it agreed to acquire Wachovia in a deal worth $15.1 billion at the time, or $14.4 billion based on Wells Fargo's closing price yesterday of $33.64. Wells Fargo's deal did not require any government support.
The battle between Citigroup and Wells Fargo for Charlotte, N.C.-based Wachovia moved to both state and federal court over the weekend.
All of the parties involved have stressed the urgency of reaching a resolution, as a prolonged court fight could further weaken the ailing Wachovia.
Wachovia, like many banks, has been slammed over the past year by defaulting mortgages, particularly in its portfolio of option adjustable-rate mortgages.
It was clear from documents filed in federal court Sunday that Wachovia was in considerable trouble when it agreed to the Citigroup deal. Wachovia disclosed that it agreed to the deal "with the understanding that a seizure of its banking assets later that day by the Federal Deposit Insurance Corp. would occur" unless it accepted Citigroup's proposal.
Earlier yesterday, Citigroup sued Wachovia, Wells Fargo, and the directors of both companies, seeking more than $60 billion in damages for interfering with the bank's planned takeover of Wachovia's banking operations.
The complaint, brought on Saturday and filed yesterday in New York Supreme Court, seeks more than $20 billion in compensatory damages and more than $40 billion in punitive damages from Wells Fargo for tortious interference.