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Continuing my previous post on the Citi (NYSE:C) / Wachovia (WB-OLD) deal, and some comments from myself and others on that post , here is what is known so far.

At the end of the year, we will get proxy statements and will be able to vote on the deal. I sure as hell am not voting for it unless something significant changes about the deal. As it stands, Citi paid just over $14 billion for Wachovia’s assets that it plans to take over - $12B to the Feds and the rest to Wachovia, and the Feds brokered this deal. Citi also agreed to cover up to $42 billion in losses on Wachovia’s mortgage portfolio. Anything above that the Feds will cover. But Citi's CEO also stated that the losses will not go beyond $42 billion. What the hell is the Feds being paid $12 billion for then? Why is that not being paid to Wachovia? This is like robbing us Wachovia shareholders and paying the Feds for absolutely no plausible reason.

Another reason why this is seriously robbing us blind is that the deal was done with Citibank, which has not reported profits for a long time. It has problems of its own. Wachovia is a great bank with stellar customer service and I’m afraid that Citibank will ruin all that. The Golden West portfolio is the problem with Wachovia, and if the Feds really want to solve this problem and take $12 billion in return, I would rather have Wachovia pay them $12 billion to take over the entire Golden West portfolio than this strange deal. Also, that monstrosity called Citibank will just become a bigger one. If you would have asked anyone before this deal which bank they think is in bigger danger of collapsing, Citibank or Wachovia, I think that most people would have answered Citibank.

In fact, a lot of people were betting on Wachovia surviving, one prime example being Fidelity, who bought 70 million shares of Wachovia. Wachovia insiders have continuously bought stock, so even they didn’t expect this to happen.

Disclosure: Author owns shares of WB

Source: Robbing Peter to Pay Paul: More on Wachovia / Citi