Wells Fargo Buys Wachovia, Not Citigroup

In an interesting turn of events, Wells Fargo, not Citigroup is purchasing Wachovia for $15.4 billion that will require no government assistance, scrapping the federally backed deal with Citigroup for $2.16 billion. This is good news for taxpayers (no government assistance) and Wachovia's investors. Wells Fargo is purchasing all of Wachovia. The Citigroup deal had excluded the asset-management and brokerage operations and put the FDIC on the hook for potential loan losses.

Why is this important? Well, by acquiring Wachovia, Citigroup would have vaulted into the upper echelon of U.S. banks. The addition of Wachovia also would have allowed Citigroup to boast the third-largest network of U.S. bank branches, according to the Wall Street Journal.

Now, this development highlights weak spots at Citigroup and challenges the notion that it had moved solidly from the problem category to the solution camp as the financial crisis unfolds.