Wachovia, Citi, Wells Agree to Suspend Litigation
Friday, October 10, 2008
The Federal Reserve has negotiated a temporary agreement between Wachovia and its suitors, Citigroup and Wells Fargo, to cease all formal litigation activities. The standstill pact is effective only until noon on Wednesday, October 8, unless otherwise extended by all parties involved, and also calls for the banks to desist from formal discovery activities.
As DSNews.com reported last week, Wachovia has been caught in a bitter tug-of-war feud since Wells Fargo announced a merger with the troubled North Carolina bank last Friday, subverting what Citi thought was a done deal to acquire Wachovia's banking operations earlier in the week. Prior to the litigation suspension, Citi said it was seeking more than $60 billion in damages from Wells Fargo, claiming that Wachovia would have collapsed on September 30 without the agreement facilitated by the Federal Deposit Insurance Corporation (FDIC) for Citi to acquire Wachovia's banking assets.
All this follows efforts by Citi over the weekend to obtain a court order extending its exclusivity agreement with Wachovia, unconditionally barring Wachovia from negotiations with any party other than Citi. Wachovia quickly voiced its objections to the order, which was overturned within a day.
According to a report on CNBC, talks with the government to resolve the dispute have included the option of dividing Wachovia's operations between the two feuding banks. CNBC said that Wells Fargo is still wrangling to buy all of Wachovia, and that Citi is also considering an offer for the entire bank. However, just as it was last week, Wells Fargo's offer would involve no financial assistance from federal regulators, while Citi is petitioning for some degree of government guarantee on Wachovia's risky mortgage assets.
As DSNews.com reported last week, Wachovia has been caught in a bitter tug-of-war feud since Wells Fargo announced a merger with the troubled North Carolina bank last Friday, subverting what Citi thought was a done deal to acquire Wachovia's banking operations earlier in the week. Prior to the litigation suspension, Citi said it was seeking more than $60 billion in damages from Wells Fargo, claiming that Wachovia would have collapsed on September 30 without the agreement facilitated by the Federal Deposit Insurance Corporation (FDIC) for Citi to acquire Wachovia's banking assets.
All this follows efforts by Citi over the weekend to obtain a court order extending its exclusivity agreement with Wachovia, unconditionally barring Wachovia from negotiations with any party other than Citi. Wachovia quickly voiced its objections to the order, which was overturned within a day.
According to a report on CNBC, talks with the government to resolve the dispute have included the option of dividing Wachovia's operations between the two feuding banks. CNBC said that Wells Fargo is still wrangling to buy all of Wachovia, and that Citi is also considering an offer for the entire bank. However, just as it was last week, Wells Fargo's offer would involve no financial assistance from federal regulators, while Citi is petitioning for some degree of government guarantee on Wachovia's risky mortgage assets.
