Wachoiva : Another Bank Failure and How it Affects You

Wachovia was seized by the government and on September 29, 2008, and was bought by Citigroup. Wachovia has 3,300 retail offices in 21 states with 40 international offices. Citigroup will pay Wachovia $2.1 billion to pay for its subordinated debt (a debt obligation whose holder is placed in precedence below secured and general creditors) which basically means the debts bought by Citigroup will be paid after Wachovia's secured debt and debt owed to their creditors is paid. It will also assume $53 billion of Wachovia senior and subordinated debt. The buy will make Citigroup the largest bank in the US. The buy should be complete by the end of 2008.

Wachovia states that "Customers of both companies should continue banking as usual, and feel confident that their deposits are secure. Also, employees and vendors should continue to operate business as usual."

To down play the severity of the buy of Wachovia by Citigroup they use terms that the average consumer may not understand. When you visit the Wachovia website a blurb states "Wachovia announces bank subsidiary divestitures to Citigroup."

What does this mean? I am a customer of Wachovia and it saddens me that messages like this appear. Press releases and other messages should be explained in a manner so that all customers of Wachovia understand exactly what the buy by Citigroup means to them.
Divestitures are the sales of business holdings of a company. Citigroup purchased the retail bank, corporate and investment bank and wealth management businesses (divestitures) of Wachovia.

Wachovia investors will receive approximately $1 of Citigroup stock for each of their Wachovia shares of stock. For now, it appears that it is business as usual at Wachovia so don't take your money out of the bank.

Some Wachovia bank branches may close within the next year when Citigroup takes over the 3,300 retail offices. This will have a devasting effect on the Charlotte area where Wachovia is headquartered.

I advise all Wachovia customers to keep an eye on their account balances and monitor the behavior of your local branch staff to see if they started acting differently or see if you can pick up on hints about the health of the company.