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Battle lines for Wachovia drawn
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A showdown between two of the nation’s largest banks over the Wachovia Corp. grew into an epic battle involving two courts and a cast including Federal Reserve Chairman Ben S. Bernanke and an army of bankers, lawyers and other regulators trying to resolve the fate today of one of the biggest prizes to emerge from the credit crisis.
No clear victor had emerged, after a year’s worth of legal battles was compressed into a frenetic 48 hours. Citigroup’s agreement to buy Wachovia for $2.2 billion was in question after Judge James M. McGuire of the Court of Appeals overturned a Saturday ruling made by a New York lower court judge from his Connecticut home that had temporarily blocked the deal.
And uncertainty also loomed over Wells’ $15 billion offer for Wachovia after Justice John G. Koeltl of the U.S. District Court on Sunday postponed until Tuesday a hearing to determine whether the two sides may pursue a deal.
With financial markets already unnerved by the crisis in the global economy, Bernanke and Timothy F. Geithner, the president of the Federal Reserve Bank of New York sought to spur the parties toward a resolution. Bernanke had several telephone calls with Citigroup’s chief, Vikram S. Pandit, and Wells Fargo’s chairman, Richard M. Kovacevich, to try to resolve the dispute, according to two people briefed on the talks. The two banking executives never spoke directly to one another, one of those people said. Bernanke also briefed Treasury Secretary Henry M. Paulson Jr. on the discussions.
At stake is the shape of the American banking system, which is being redrawn almost weekly as a handful of large players merge, and the government’s own standing to broker future bank rescues after its willingness to stand behind Citigroup’s offer for parts of Wachovia was called into question.
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This will be interesting to watch since local jobs may be a stake. It seems just a few weeks ago we were told that Wachovia was OK and in fact was looking to combine with another bank to shore-up both. Does anyone know what happened to that deal? I cannot remember the other bank. Bank America, perhaps?
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