Read a Pacific Northwest, liberal perspective on world, national, and local politics. From majestic Redmond, Washington - the Northwest Progressive Institute Advocate.

Monday, September 29, 2008

Financial leapfrog on Wall Street continues as Citigroup buys Wachovia's banking arm

Another chapter has been opened in what has been a month of mergers and shakeups on Wall Street with the news that Citigroup is buying the banking operations of Wachovia Corporation, which unlike Washington Mutual, Inc. will continue to operate as a smaller company:
Citigroup will pay $1 a share, or about $2.2 billion, according to people briefed on the deal.

The F.D.I.C. said that the agency would absorb losses from Wachovia above $42 billion and that it would receive $12 billion in preferred stock and warrants from Citigroup in return for assuming that risk.

“Wachovia did not fail,” the F.D.I.C. said, “rather it is to be acquired by Citigroup Inc. on an open-bank basis with assistance from the F.D.I.C.”

Under the deal, Citigroup will acquire most of Wachovia’s assets and liabilities, including $400 billion in deposits and will assume senior and subordinated debt of Wachovia, the F.D.I.C. said.
Citigroup says the deal will create the nation's "leading U.S. retail bank with 9.8% U.S. market deposit share, and total deposits globally of $1.3 trillion."

The deal vaults Citigroup into the League of Monstrously Huge American MegaBanks. Already in the League are Bank of America (which recently bought Merrill Lynch) and JPMorgan Chase (which last week swallowed Washington Mutual after the federal government seized it).

We have to wonder: When is this going to end?

The New York Times notes that the sale will "further concentrate Americans' bank deposits in the hands of just three banks". Reporters Eric Dash and Andrew Ross Sorkin, who broke the news for the paper, add"
Together, those three would be so large that they would dominate the industry, with unrivaled power to set prices for their loans and services. Given their size and reach, the institutions would probably come under greater scrutiny from federal regulators. Some small and midsize banks, already under pressure, might have little choice but to seek suitors.
There is, fortunately, an alternative to the megabanks - and even to banks in general. All this month, with each development in the financial crisis, we've been writing about the advantages of belonging to a credit union. Big banks may be in trouble left and right, but credit unions are doing just fine.

Since credit unions are nonprofit cooperatives owned by their members, they're responsible and accountable to the communities they serve by design. Because credit unions don't serve Wall Street, they are free to focus on the well-being of Main Street instead of trying to turn a bigger profit every quarter.

Inevitably, the quest for bigger and badder profits leads to greed and carelessness, which is how we got into this subprime mortgage mess.

Credit unions have no reason to be greedy, because again, their only shareholders are their members. Any extra revenue generated by a credit union (that it doesn't need to operate or grow) is returned to its members in the form of lower fees and better rates. If that sounds like a good deal to you, consider opening an account with a credit union today and leaving that megabank behind.

Learn more about credit unions at, or find a credit union that you're eligible to join by visiting


OpenID beingmystical said...


Hello, We need to be promoting this option in the public conversation...

Watch this short video "The Rip Off Of The Century...

Solving the Wall Street Financial Crisis: Monetary Reform...

Please help republish these messages, and let's get our representatives talking about this option.. now is the time to strike while the iron is hot, we could use this moment to truly get our country back!

September 29, 2008 3:24 PM  

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