Citi vs. Wells Fargo in Wachovia purchase
Don't the Wachovia stockholders have the last word in deciding which bank will aquire Wachovia? If so, why is there a debate?
Re: Citi vs. Wells Fargo in Wachovia purchase
Wachovia, Citicorp and the FDIC signed a contract before the Wachovia-Wells Fargo deal was reached. When the FDIC steps in it essentially takes control of a bank away from its officers and shareholders. (This is a gross oversimplification of how such seizures work, but it's good enough for purposes of this answer.) I'm not sure if the FDIC actually seized Wachovia or merely brokered a last-minute deal to avert such a seizure.
If a bank's shareholders had the final say after a seizure they might vote to keep the bank operating as it was before. But by participating in the FDIC's programs, banks agree to be taken over by that agency when certain conditions arise. It is too late to go back on that decision once the bank has been seized after benefiting for years from FDIC protections.
They key questions here are whether Wachovia has the authority to agree to a merger with Wells Fargo after the FDIC brokered a different deal with Citi and, even if it does, whether the way it made this agreement violated the terms of its contract with Citi.
