US Gov to give Citigroup another $20billion, how could they have afforded Wacovia

[Tastes_of_Chocolate]

So far, Citigroup was given $25 billion last month. Now they are getting an additional $20 billion. Yet just a short time ago, they were trying to buy Wacovia. Does anyone know where the money to buy Wacovia would have come from?

[Duckster]

10:36 AM EDT on Monday, September 29, 2008

New York – Citi (NYSE: C) today announced it has reached an agreement–in-principle to acquire all of the banking subsidiaries of Wachovia Corporation (NYSE: WB), creating the largest U.S. bank by total deposits.

Wachovia will remain a public company and retain its asset management, retail brokerage, and certain select parts of its wealth management businesses, including the Evergreen and Wachovia Securities franchises. Going forward, Wachovia expects to have adequate capital to support its remaining businesses, an appropriate allocation of tangible equity, and certain tax assets that will be recognized immediately.

Under the terms of the agreement-in-principle, Citi will pay Wachovia approximately $2.16 billion in stock and assume Wachovia senior and subordinated debt, totaling approximately $53 billion.

Source: http://www.wcnc.com/localbusiness/localbusiness/stories/wcnc-092908-mw-citigrouprelease.c33dda95.html

However, in a New York Times story dated 09 October 2008:

Citigroup said late Thursday that it will not try to block a merger between Wachovia and Wells Fargo, but that it would continue to seek $60 billion in legal damages after the Charlotte-based bank spurned a $2.2 billion deal proffered by Citigroup at the government’s behest.

– snip –

At the heart of the dispute is the fate of Wachovia, which crumbled under the weight of billions of dollars in toxic mortgages. Wachovia began seeking a merger partner for several weeks and held talks with Citigroup and Wells Fargo, as well as Morgan Stanley and Banco Santander of Spain.

Beginning late last week, Citigroup sought to halt the Wells Fargo-Wachovia deal and convinced a New York state court judge to issue a temporary injunction. But an appeals court overturned that order.

Federal regulators stepped in beginning last weekend, however, forcing Citigroup and Wells Fargo to strike some sort of compromise to avoid further upsetting the jittery markets.

[ul]
[li]On 29 September 2008, Citigroup closed on the NYSE at $17.75 a share.[/li][li]On 09 October 2008, Citigroup closed on the NYSE at $12.93 a share.[/li][li]Last Friday, Citigroup closed on the NYSE at $3.77 a share.[/li][li]On 25 May 2007, Citigroup closed on the NYSE at $55.12 a share. It’s been downhill ever since.[/li][/ul]
Where would the money have come from? From an exchange in stock that no longer has value.

[obfusciatrist]

Also, the purchase of Wachovia would have given Citigroup a dramatically increased deposit base in the United States which might well have prevented the current crisis of confidence in Citi.