Wachovia Warrior

The Lowdown on Citi / Wachovia

USC-Col:

Creditors can force companies into bankruptcy. It's called an involuntary petition for bankruptcy.

The Lowdown on Citi / Wachovia

t_ngern:

How do you get a $13 billion valuation for what remains of Wachovia after this deal? How do you account for preferred shares that remain on Wachovia's books after this deal is completed?

The Lowdown on Citi / Wachovia

Bear Stearns could have been forced into bankruptcy by its creditors, which is the analogue to FDIC forced receivership.

Bear Stearns shareholders in that respect had no more leverage than Wachovia shareholders do now.

The market's perception is that this is a great deal for C based on the price action of C stock since the deal.

The Lowdown on Citi / Wachovia

Bear Stearns shareholders were initially offered $2/share. They revolted and threatened to blow up the deal with JP Morgan. This gave them leverage to renegotiate the terms so that they received $10/share instead.

If the bailout package passes in its current (modified) form, the SEC can suspend mark to market accounting (which should help all banks with illiquid CDOs), the government will help create a market for CDOs (whether banks choose to sell directly to the government or to take advantage of the liquidity created) and FDIC deposit insurance will cover $250,000 for individual accounts.

All of this would have helped stem the tide at banks like Wachovia but Paulson/Bernanke/Bush were never proactive enough to get in front of the problem. Indeed, even now, they should have proposed much higher deposit insurance limits as some European countries have done.

Wachovia was never taken over but instead sold itself subject to shareholder approval.

If circumstances have drastically improved in Wachovia's favor, there's no reason why shareholders shouldn't demand a higher sale price?

The Lowdown on Citi / Wachovia

I suggest posting the "savewachovia.com" link to other financial websites such as www.fool.com, www.cnbc.com, www.thestreet.com and even www.wachovia.com