Will it blend? by Claudia Sonea

Ops, the House lawmakers rejected the bailout plan and all the investors saw their expectations gone with the wind. Just as tragically as the movie made after Margaret Mitchell's book, Wall Street's shares went in a downward spiral and the situation seems to worsen. All eyes are on Citigroup that after being rumored to study the situation of Wachovia announced on Monday to buy its banking operations for $2.1 billion. Will that suffice to blow some steam off or will it lead to another chaos?
It is well-known that the current estate of Wachovia is the consequence of the bad acquisition made in 2006 of mortgage lender Golden West Financial Corp. It surely brought down the bank to which the option adjustable-rate mortgages actually put an end by leading to defaults and delinquencies. Because of the 42 billion of losses from its $312 billion loan portfolio, Wachovia was forced either to declare bankruptcy, which would have meant a black ball for the economic crisis, or to be purchased by another bank that would have assumed these losses. Citigroup's retail franchise was the one making the offer for the Wachovia which will continue to be a public company, but Wachovia's shareholders and regulators are still ruling on their decision. The deal must be closed until December 31.
Bank of America Corp. and JPMorgan Chase & Co are the biggest banks in US and Citi has entered their league. Is it tough enough to stay there or the three straight quarters without profit will bring down the Citigroup Inc. that already announced a cut in half of its quarterly dividend and the sale of $10 billion in common stock. FDIC will also receive $12 billion in preferred stock and warrants as a condition of the deal. How it will all blend for Citigroup that lost a total of $17.4 billion after writing down its assets and the failure of the government's proposed $700 billion rescue plan for financial institutions? Stay connected and you will find out!


related story: http://news.yahoo.com/s/ap/financial_meltdown;_ylt=Alkh3NpsbQLH51IkHekoHC2s0NUE

by Claudia Sonea for PocketNews (http://pocketnews.tv)

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