Last week, Citigroup and the FDIC seemed to be close to a deal to acquire the troubled Wachovia Corp. Then, on Friday, Wells Fargo swooped in and made another deal with Wachovia, acquiring it before Citigroup had announced its terms and -- significantly -- without the help of the FDIC.
As a result, now there are two claims to Wachovia. Citigroup claims that Wells can't have Wachovia. The justice system hasn't made up its mind yet, either, with a New York State Supreme Court Judge siding with Citi and a US Federal District Court Judge siding with Wells Fargo.
The Wall Street Journal points out that the last thing the Fed would like now is turmoil involving large financial institutions like Wachovia, Citigroup and Wells Fargo:
But the legal back-and-forth didn't appear to derail the discussions about splitting up Wachovia, said people familiar with the matter. Regulators and bankers are scrambling to quickly end the drama in part out of concern that if Wachovia remains in limbo when U.S. markets open Monday morning, it could further spook already jittery investors and bank customers.