The Citigroup will buy up banking operations of Wachovia Corporation; the deal is facilitated by the Federal Deposit Insurance Corp (FDIC). Accordingly, the Citigroup will absorb up to $42 billion of losses in the deal. Also, the bank will grant the FDIC $12 billion in preferred stock and warrants. FDIC on the other hand will cover remaining losses, if any.

 

The crisis was looming on Wachovia in turmoil phase of US economy. However, according to the FDIC, Wachovia didn't fail; all depositors are protected. Ben Bernanke, Chairman of Federal Reserve said he supports the timely actions taken by the FDIC, which according to him demonstrates government's unwavering commitment to financial and economic stability.

 

Henry Paulson, Treasury Secretary welcoming the deal said that it would mitigate potential market disruptions, and according to him failure of Wachovia would have posed a systemic risk to the nation's financial system. He proclaimed that in the period of market stress government is committed to taking all actions necessary to protect nation's financial system and economy.