Suitors joust to rescue Wachovia

A man passes by a Wachovia Bank branch October 2, 2008 in Washington, DC.

TEXT OF STORY

Kai Ryssdal: Five short days ago you could've bought one of the banks at the heart of the subprime mess for a relative song. Wachovia has billions of dollars in lousy mortgage debt on its books. But literally overnight it's become a hot property. From North Carolina Public Radio, Marketplace's Janet Babin reports.


Janet Babin: Wells Fargo offered more than $15 billion for Wachovia today. There's just one problem. Citigroup claims it already had a deal to buy Wachovia's banking operations for just over $2 billion. At that price, Wachovia shares would be worth about $1. Wachovia shareholders, like Mark Beck, were outraged by the deal. So he started WachoviaVoteNo.com. It's had more than 100,000 hits.

Mark Beck: The Web site was a gathering place for just a complete shareholder revolt.

Angry shareholders say Wachovia's worth more, even with all its toxic assets. Christopher Whalen is managing director at Institutional Risk Analytics. He says the dueling offers might mean the government should rethink the bailout plan.

Christopher Whalen: I think it's demonstrated that there is a private market out there that cares about these assets very much.

That includes superstar investor Warren Buffett, the largest owner of Wells Fargo stock. He's been scooping up financial stocks at bargain prices. Robert Hegarty is managing director at Tower Group.

Robert Hegarty: He's an active investor and he understands the financial markets better than most investors do.

Citi says it may sue to force its deal. But Whalen says, bad idea. That's because the FDIC is involved. Under the Citi deal, the government agreed to take on some of Wachovia's debt.

Whalen: If I were the Citi guys, I'd think about all this before I started engaging lawyers. They can't sue the FDIC.

The FDIC said today, it stands behind Wachovia's original deal with Citigroup.

I'm Janet Babin for Marketplace.

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