On Monday, the Federal Deposit Insurance Corporation transferred Wachovia Corporation’s banking operations to Citigroup and the $700 billion bailout bill stalls in the House.
Fort Worth, TX (WiredPRNews.com)—The Federal Deposit Insurance Corporation moved the banking operations of troubled Wachovia to Citibank on Monday.
According to a non-bylined September 29, 2008 Associated Press article that appeared on Yahoo.com’s finance page, Citigroup will take over $40 billion in bad mortgage debt from Wachovia’s portfolio of $312 billion in loans. Wachovia’s 2006 acquisition of Golden West Financial, according to the article, is largely responsible for Wachovia’s bad home loan debt.
In the second quarter of this year, Wachovia posted a $9 billion dollar loss and reduced its dividend, according to the Associated Press article.
Citibank’s acquisition of Wachovia is the second major FDIC-driven bank seizure in less than a week. Washington Mutual met the same fate last week when JP Morgan Chase took control of the nearly 119-year-old Seattle-based bank. Wachovia and WaMu suffered from an ever-increasing number of defaults on adjustable-rate mortgages that offered deferred payments and low preliminary payments, according to the article.
While the FDIC prevented the failure of Wachovia, the House of Representatives on Monday failed to pass the $700 billion bailout bill. According to a September 29, 2008 Associated Press article by Julie Hircshfeld Davis, which appeared on Yahoo.com’s finance page, the bill to boost up the struggling US credit market failed by a margin of 205-228.
This led to one of the largest single-day declines in Wall Street history, with the Dow Jones Industrial average dropping 777 points on Monday, according to the Hirschfeld Davis article.