No big changes foreseen for Fayette’s Wachovia customers

It was an extraordinarily nervous day for many residents Monday as a harmonic convergence of events sent the country’s financial markets on a wild ride.

The first news to greet investors was the purchase of Wachovia bank by Citi.

Wachovia’s corporate communications manager, Evelyn Mitchell, said customers will see no changes in their five individual branches within Fayette County.

“It’s business as usual today (Tuesday) and customers have full access to their deposits,” she said.

Mitchell said it’s too early in the process to know if any jobs will be eliminated in the Atlanta region because of the takeover, but said Atlanta remains a key market for the company.

Shortly after the announcement, the House of Representatives began debate on a proposed $700 billion bailout of the nation’s financial agencies. What should have been a 15 minute vote instead turned into more than 40 minutes as the drama was captured live on C-Span. As warnings of the Dow’s demise were yelled on the House floor, the issue was shot down by a 228-205 vote.

Fayette’s Representative Lynn Westmoreland voted against the measure, but had hopes Congress would eventually settle on an alternative.

“I do believe that our nation faces great financial challenges right now, and I believe that Congress should act. But the House should not appropriate up to $700 billion for a bill that didn’t exist until a few days ago and that never went through one committee hearing. This legislation costs way too much to pass through Congress with so little scrutiny. If the process is broken, the product is flawed. Combined with war costs, other bailouts and the stimulus packages, we can’t afford to be wrong with a price tag this high,” Westmoreland said in a prepared statement.

“I have supported an alternative plan that would lower taxes and regulations to create an incentive for private money, foreign and domestic, to flow back into the credit markets. Unfortunately, alternative versions were shut out of this closed process,” Westmoreland said in a press release.

After the vote, the Dow dropped more than 770 points and had a paper loss of more than $1.2 trillion.

But Tuesday morning the Dow was up more than 200 points as investors hoped that an eventual deal would be done.

Congress is in recess until Thursday and lawmakers on both sides are hopeful that some form of a deal will get done by the end of the week.

Citi’s acquisition of Charlotte-based Wachovia would create the largest U.S. bank by total deposits.

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.

According to a press release, Citi will acquire more than $700 billion of assets of Wachovia’s banking subsidiaries, and related liabilities. The Federal Deposit Insurance Corporation (FDIC) has agreed to provide loss protection in connection with approximately $312 billion of mortgage-related and other Wachovia assets.

Citi is responsible for the first $30 billion of losses on this portfolio, and expects to record these expected losses under purchase accounting upon closing of the transaction. Citi is also responsible for the next $12 billion in losses up to a maximum of $4 billion per year for the next three years. Citi has also agreed to issue to the FDIC preferred stock and warrants with a combined value of approximately $12 billion. The FDIC has agreed to be responsible for any further losses on this portfolio.

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