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Wachovia the Latest to Fall

Looks like Wells Fargo offered to pay more for Wachovia. This means that they’ll be taking it over instead of Citi. Details to follow in a new post (which I’ll link here). As a Wachovia customer, I think I prefer Wells Fargo to Citi.

But not fail. Wachovia was bid for by Citigroup yesterday (Sept 29) before it had a chance to fail. Unlike the other recent bank takeovers (and bank failures), this one hit home since Micah and I have our paper checking set up at Wachovia. I found myself reacting to it on two levels: first as a taxpayer, then as a customer.

Details of Citigroup’s Wachovia Takeover

As a taxpayer, I was pleased that Citigroup stepped in when it did. Because Wachovia hadn’t failed, Citigroup simply bought the entire deposit network. No need for FDIC insurance here means less taxpayer money involved.

Now, the FDIC may be involved in the loan part of the transaction. Not surprisingly, what sunk Wachovia was its loans. Citigroup will be absorbing over $300 billion in loans and has agreed to cover up to $42 billion in losses on these loans. The FDIC will have to cover anything more than that.

Again, as a taxpayer, I’m pleased that at least Citigroup will take the first $42 billion in losses. I hope that it won’t even get to that. But loanees all over the nation need to wise up so this won’t happen. I remember reading an article by Gather Little by Little (who works at one of the large banks), where he revealed that people are paying their credit cards before their mortgages. Yes, they should pay off both, but if it comes to one or the other the mortgage should be first.

Apparently, this isn’t the last of Wachovia. While they’ve sold their retail and commercial banking operations (along with the loans that got them into this mess), Wachovia will continue its operations as a retail brokerage, insurance provider, and retirement plan company.

For Wachovia Customers

For now, banking will go on as usual. If the deal is approved then Citi will essentially be running the separate Wachovia company and transitioning Wachovia branches and customers into Citi branches and customers. In a couple years, all Wachovia customers will be Citigroup customers.

Of course, even as we stay with Wachovia things may be shaken up along the way. I certainly don’t want to move my account now, but there a part of me that says “I specifically didn’t want to bank with Citi. I’d rather move my account.” But that’s not a good idea right now.

a) Who would we bank with? At this point it’s hard to tell who is solid and who else will fail. I still feel pretty confident about ING Direct, where most of our money is. But I would like something brick-and-mortar with easy check-writing. And national, so we can move and still hopefully have branches around. So far, Citigroup/Wachovia still fits those requirements. It would be annoying to move to another bank only to have it fail or be taken over.

b) Pulling my money will just create more instability. I don’t want to be part of a panic or a run on the bank.

So for now and at least until things quiet down, we will continue to do part of our banking with Wachovia/Citigroup. Our money should be as safe there as anywhere. When things have quieted down and we know who’s still standing, we may do some more shopping around to see who offers the best banking package. But at this point, that wouldn’t be a smart move for us personally or for us as players in the economy.


{ 2 trackbacks }

The Friday gathering - Updates and cell phones
October 3, 2008 at 6:53 am
Wachovia Update Roundup
October 5, 2008 at 11:30 am

{ 3 comments… read them below or add one }

Laura September 30, 2008 at 4:39 pm

We’re on ‘wait and see’ mode too. If the customer service is good enough, we’ll stay. I just don’t want to go back to Bank of America.

Dad September 30, 2008 at 8:36 pm

This is off topic but it takes off from the reference to people paying their credit cards before their mortgage. As you and Gather Little by LIttle say this is a bad idea.

Over on that site, I read the secrets Credit Card companies don’t want you to know. I noticed that one was missing. Since the comments are closed over there, I’m commenting here.

Gather suggests paying online rather than by US Mail and I agree. It is also suggested that you be careful to copy the payment address carefully. Actually, you shouldn’t be copying it all all. Most companies include a payment return slip and an envelope. Big companies like credit card companies have fancy equipment to process payments. If you use the slip and provided envelope, it processes more quickly. By regulation, if you use your own envelope or do not return the slip or you include anything else in the envelope, they are allowed to take longer in processing the payment. Otherwise there are legal limits on how long they can take in processing a payment. Overall, I think the best option is the credit card company’s web site since the payment is done quickly.

On topic, I agree with you this is not the time to be moving much. As long as you’re in an FDIC insured bank and don’t have large balances ($100,000+) or the equivalent if you are in another country, you should be safe. If you are not in this safety bounds, you probably should move to a position of safety by moving excess funds to another FDIC insured bank.

Dan Ray October 1, 2008 at 12:34 pm

Hi, Mrs. Micah. Dan Ray here, from over at Taking Charge / CreditCards.com. Do you have a Wachovia credit card? I have Connie Prater, one of our reporters, doing a roundup of what all the changes mean to credit cardholders, and I’d be interested if you, or any holder of a Wachovia credit card see any changes in the terms/conditions imposed by Citi. E-mail to conniepatcreditcards.com, please.

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