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…On Banking Litigation.

Posted by Steve on October 5, 2008

Well, this didn’t take long. Honestly, I’d hoped I was wrong (despite the fact that I hate being wrong, as it’s a blow against the very core of my self-image and makes me feel like much less of a man) when I smelled a lawsuit in Citigroup’s previous press releases regarding Wells Fargo’s intervention in the FDIC-arranged sale of Wachovia’s banking assets to Citigroup.

So, Citigroup’s gotten a temporary injunction blocking the sale. My hope is that it’s quickly resolved, because dragging this out through litigation won’t be good for anybody.

Thing is, I, of course, don’t know whether or not there really was an exclusivity agreement; whether or not, if an exclusivity agreement exists, it was violated; whether or not any exclusivity agreement between Wachovia and Citigroup, if it exists, can hold up in court; or whether or not the terms of any exclusivity agreement, if it exists, nonetheless allow for the eventual sale of Wachovia to someone other than Citigroup.

Here’s what I opine, though: I hope there isn’t an exclusivity agreement, since as I understand things, the FDIC told Wachovia they were going to be sold to Citigroup. I could be wrong, since everything I know is based off of the companies’ press releases and the reporting on a few web sites, but I take that to mean Wachovia was never offered to other interested parties (like Wells Fargo), or that Wachovia actually wanted an exclusivity agreement with Citigroup. So, in light of Wachovia having someone they want to sell themselves to, it doesn’t strike me as right for them to have been made to sign an exclusivity agreement. It especially doesn’t strike me as right for Citigroup to be able to get specific performance of Wachovia-is-sold-to-them as compensation for the exclusivity agreement’s violation, and that specific performance seems to be what Citigroup’s asking for.

Thing is, a merger of Wachovia’s entirety with Wells Fargo seems like it’ll be better than a breaking-up of Wachovia with part of it going to Citigroup for everyone who isn’t Citigroup. As in, better for Wells Fargo, better for everyone associated with Wachovia, better for the FDIC, and by extention better for the public at-large. And as they say, “The needs of the many outweigh the needs of the few.”

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