Hell hath no fury like a Citigroup scorned. Oh, scratch that.
Citi (C) agreed Friday to take $100 million from Wells Fargo (WFC) to settle lawsuits tied to the fall 2008 battle for the remains of the failed Wachovia bank.
Obviously, $100 million is not exactly chump change. But it’s hard to say it really constitutes real money to these banks, which together have more than $3 trillion in assets – particularly given the sturm und drang over the rights to buy Wachovia, which imploded after buying the biggest option adjustable-rate mortgage mess ever right at the top of the housing bubble.
Citi initially agreed in September 2008, two weeks after the collapse of Lehman Brothers, to buy Wachovia for a song in a government-assisted deal. An FDIC-backed acquisition would have amounted to a backdoor bailout of Citi, whose CEO Vikram Pandit naturally emphasized that the $2 billion transaction would “accelerate our efforts to establish Citi as the world’s leading global financial institution.”
But just days later, Citi was scooped by a standalone bid from Wells. That move, together with an IRS ruling in Wells’ favor, paved the way for Wells to emerge relatively unscathed from the financial crisis – unlike Citi, which signed up for multiple rounds of government assistance, including $45 billion in Treasury capital and more than $300 billion in asset guarantees.
Citi, naturally, wasn’t happy. In the wake of Wells’ grab of Wachovia, Citi was left seething about injunctions and lawsuits, citing a lockup deal it had signed with Wachovia.
Citi has demanded that Wachovia and Wells Fargo terminate and not proceed with any proposed transaction, any conduct in furtherance thereof, or any other act in violation of the Exclusivity Agreement. Citi has substantial legal rights regarding Wachovia and this transaction.
Indeed, Citi let slip that it was seeking $60 billion in damages from Wells.
Two years and multiple bailouts later, the substantial legal rights are being waived for a relative pittance. But all’s well as long as everyone gets along.
“We are glad to put this matter behind us and we look forward to our two institutions working together constructively in the future,” the banks said.
