It happened over the weekend. Wachovia and Citigroup worked with the government to secure another stunning transformation in banking caused by the subprime collapse.
According to an AP story, Citigroup will buy Wachovia's banking operations.
Citigroup Inc. will acquire the banking operations of Wachovia Corp., one of the nation's largest banks, in a deal facilitated by the Federal Deposit Insurance Corp.
Citigroup will absorb up to $42 billion of losses in the deal, with the FDIC covering any remaining losses, the government agency said Monday. Citigroup also will grant the FDIC $12 billion in preferred stock and warrants.
The FDIC asserted that Wachovia didn't fail, and that all depositors are protected and there will be no cost to the Deposit Insurance Fund.
Of course they didn't fail. Citigroup bought their US$42 billion in losses.
Notice that a government entity becomes a shareholder in a bank. Someone please correct me if I am wrong, but is this normal?