Government Wants Financial Companies Out of Student Loan Business

Bank student loans set for overhaul, according to this post by American Banking News.

At the heart of the legislation, Congress is aiming to get subsidized private companies out of the student lending business and turn it over to the government. Some predict that the proposal will eliminate up to $80 billion in costs by the end of the next decade by eliminating subsidies that are paid to lenders to keep their interest rates down.

The savings from the payment would be used to make colleges more affordable for low-income individuals by increasing the maximum Pell Grant by $1,400 up to a maximum of $6,900. In order to make up for the lack of affordable private student loans that are expected, the government is planning to offer additional low interest loans to students.

Wachovia Did Not Fail, But Citigroup Takes Them Whole

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?

Wachovia to Merge with Citigroup?

Wachovia has started talking to Citigroup about a possible merger.