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Citi's takeover of Wachovia secures US backing

Text by AFP

Latest update : 2008-12-10

US financial authorities have approved Citigroup's plans to take over the banking operations of troubled rival Wachovia. Federal authorities will shoulder Citigroup in assuming Wachovia's losses, which amount to up to 312 billion dollars.

US authorities said Monday they had facilitated a takeover of Wachovia's banking operations by Citigroup in a deal that gives the government a stake in Citi.

Citigroup will assume up to 42 billion dollars of losses on a 312 billion dollars of a pool of loans held by Wachovia, based in Charlotte, North Carolina, the Federal Deposit Insurance Corp. said.

Under the agreement, the FDIC will absorb losses beyond that and take a stake in Citigroup for essentially guaranteeing the losses Citigroup absorbs.

Citigroup has granted the FDIC 12 billion dollars in preferred stock and warrants to compensate the FDIC for bearing this risk, the FDIC said in a statement.

Date created : 2008-09-29

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