Wachovia, the sixth-largest U. The Federal Reserve views resolving the dispute as important, having already decided that Wachovia must be sold for the sake of the stability of the financial system, a person familiar with the matter said. Discussions were continuing late on Sunday, the person added. Wachovia did not sign an official merger agreement with Citi, although it did sign an agreement to negotiate exclusively with Citigroup through Oct 6.
But on Friday, Wells Fargo, the seventh-largest U. Citigroup won a New York state court order late on Saturday that would have extended an agreement it had to negotiate exclusively with Wachovia. In she managed the finance transition for Wells Fargo's acquisition of First Security and then became head of finance for the Diversified Products Group. In , she was named Finance Officer of Western Banking, an eight-state regional banking group.
She began her banking career in with Summit Bancorporation in New Jersey. He has been in his current role since He has been Chief Credit Officer since late and in was given added responsibility for compliance and risk management. He had responsibility for credit approval, policy and reporting for Wholesale Banking. He joined the company in after Wells Fargo acquired Crocker Bank. Before being named head of credit for Wells Fargo Wholesale Banking, he led private banking business of Private Client Services, headed systems and operations for Wholesale Banking, and was head of U.
He joined Wells Fargo as Chief Auditor in and has 31 years of public accounting and financial services industry experience. From to , he was the European Chief Auditor at Citigroup. Following the death of Michael R.
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ABC News Live. On September 7, , the Federal Housing Finance Agency had placed Fannie Mae and Freddie Mac into conservatorship and the Treasury had used its authority, granted by Congress in July , to make financial support available to these two government-sponsored entities. On September 15, Lehman Brothers had filed for bankruptcy after efforts had failed to organize private-sector assistance or arrange an acquisition by another company. The failure of Lehman Brothers ended efforts by private investors to provide liquidity to American International Group, Inc.
AIG , which faced its own mounting financial difficulties. On September 16, the Board acted to provide temporary liquidity to AIG under the emergency lending authority of section 13 3 of the Federal Reserve Act. Losses at a prominent money market mutual fund caused by the failure of Lehman Brothers sparked extensive withdrawals from a number of similar funds. These events caused extraordinary turbulence in financial markets: equity prices dropped sharply, the costs of short-term credit spiked upward, and liquidity dried up in many markets.
WaMu was the second largest holder of option ARMs at the time, and Wachovia was the largest holder of these assets. The failure of WaMu thus raised creditor concern about the health of Wachovia. Wachovia's stock price declined sharply and credit default swap spreads on its debt surged.
The day after the failure of WaMu, Wachovia Bank depositors accelerated the withdrawal of significant amounts from their accounts. In addition, wholesale funds providers withdrew liquidity support from Wachovia. It appeared likely that Wachovia would soon become unable to fund its operations.
That week, Wachovia management, which had engaged in tentative discussions with potential merger partners earlier in the month, began discussions in earnest to sell the company. On September 27 and 28, both Citigroup and Wells Fargo, the second and fifth largest banking organizations in the United States, respectively, conducted due diligence investigations of Wachovia.
Both Citigroup and Wells Fargo also contacted federal regulators indicating that government assistance would be needed in connection with each of their proposed bids to acquire Wachovia.
The act also provides that the FDIC may take other actions or provide assistance that would not meet the least-cost test if the Secretary of the Treasury, in consultation with the President, and based on the recommendation of both the board of directors of the FDIC and the Board of Governors of the Federal Reserve each by a vote of two-thirds of its members , determine that compliance with the least-cost requirement would have adverse effects on economic conditions or financial stability and other action or assistance would avoid or mitigate those adverse effects.
The Board of Governors and the FDIC were concerned about the systemic complications of the failure of the fourth largest bank in the United States during this fragile economic period. The Board believed that a full or partial default by Wachovia and its subsidiaries on their debt would intensify liquidity pressures on other U. At the time, U. Investors were becoming increasingly concerned about the outlook for a number of U.
At the time, Wachovia was considered "well capitalized" by regulatory standards and until very recently had not generally been thought to be in danger of failure, so there were fears that the failure of Wachovia would lead investors to doubt the financial strength of other organizations in similar situations, making it harder for those institutions to raise capital and other funding.
In addition, if a least-cost resolution did not support foreign depositors, the resolution would endanger what was a significant source of funding for several other major U. Creditors would also be concerned about direct exposures of other financial firms to Wachovia or Wachovia Bank, since these firms would face losses in the event of a default.
In particular, losses on debt issued by Wachovia and Wachovia Bank could lead more money market mutual funds to "break the buck," accelerating runs on these and other money funds. The resulting liquidations of fund assets--along with the further loss of confidence in financial institutions--could lead short-term funding markets to virtually shut down; these markets were already under extreme pressure in the fall of
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