the Wachovia debacle
 

FDIC steps in with Wachovia. Arranges for "purchase" by Citi on excellent terms, with FDIC as a backstop.

Then Wells Fargo comes through with an offer an order of magnitude better for Wachovia stock holders, Wachovia accepts.

Now Citi objects and says the Wells Fargo deal is a breach of contract.

AND WE ARE TO BELIEVE THAT THIS FIRE SALE BY THE GOVT. WAS NECESSARY, AS THERE WAS NO PRIVATE ENTITY WILLING TO STEP IN?

It's interesting how in two weeks, capitalism has been abandoned.

My parents had a home equity line of credit through Wachovia that was frozen last week.

Wells Fargo was at the negotiating table and walked away because of fear over mounting losses in loan portfolio. A law change came about at the time that would allow banks to write-off losses from acquired portfolios that changed the entire dynamic and lead to Wells Fargo swooping back in to make the deal at the last minute. This specific tax code change meant billions to the bank since the anticipated lifetime losses from Wachovia's portfolio is estimated at $74B. The tax benefit will more than likely cover the entire $15B cost of the transaction.

Very common practice right now to combat mounting losses. Under TILA (Truth in Lending Act) a bank is legally able to take such actions if the equity pad on the loan has been reduced by a substantial margin - unfortunately that is regardless of the credit worthiness of the customer and I too have been a victim recently despite a credit score>800. Resticting or reducing Home Equity LOC's is a much trickier ordeal (from a legal standpoint) than taking adverse action on another lending product such as credit card, personal loan, etc. Home Equity LOC's have virtually become an "unsecured" lending product in the last year or so with declining home values and banks are doing as much as they can to hedge losses.