Here’s the deal. Wells Fargo is gonna press the feds like mad to put Wachovia in receivership with the FDIC before it makes a final play to buy Charlotte’s number two bank and major local employer. The feds are gonna press back, knowing that WB is not technically insolvent and mindful that Wells will make out like bandits once the FDIC cleanses Wachovia.
But. The alternative is having Wachovia’s West Coast assets gumming up the freshly minted bailout plan, which has been chopped down to $250b. in immediate fix-it money. The gnomes at Treasury
want to sprinkle that money around like fairy dust, not watch half of it go to Bob Steel’s $122b. option ARM hangover.
Meanwhile, think Doug Smith will be writing any more gloating “tasty barbeque” odes to Banktown? Best case scenario with a Wells purchase is that several thousand jobs leave the QC.
Update: So Citi it is. Why? Because it was willing to roll with terms the FDIC and Fed were offering at the moment. The basic outline is that Citi will be limited to $42b. in losses. The upshot is that there must be a helluva lot more in problem assets than the $122b. in option ARMs W was carrying. This was manifestly the limit that Wells Fargo was willing to consider. Citi, however, has now moved officially into de facto nationalized bank status, in business with the feds and far beyond too-big to fail.
