Rick Rothacker and Kerry Hall
The Charlotte Observer
October 2, 2008
On Friday, with its stock plunging 27 percent, Wachovia experienced a “silent run” on deposits, but the bigger worry for regulators was that other banks wouldn’t provide the Charlotte bank with necessary short-term funding when it opened for business Monday, sources familiar with the situation told the Observer.
With Wachovia already looking for a merger partner, the Federal Deposit Insurance Corp., in consultation with other regulators, required the bank to reach a sale to Citigroup on Monday morning.
The FDIC, for the first time, used legislative authority created in 1991 to help it deal with a “very large complex bank failure” on short notice. It requires approval from heavy hitters – two-thirds of FDIC board members, two-thirds of Federal Reserve board members as well as the Treasury secretary, who must consult with the president.
“When Wachovia opened Monday it would not have had a source of liquidity,” a source familiar with the situation said. “It really could not have opened under those circumstances. That’s why (the FDIC) put together the assistance package.”
- A d v e r t i s e m e n t
The new details show the precarious situation Wachovia faced over the weekend as it rushed to find a suitor, even as Congress debated a possible bailout plan. Intense negotiations in New York included a decision by Wells Fargo to pass on a deal Sunday and frequent consultations with the Office of the Comptroller of the Currency, the bank’s primary regulator, and the FDIC, sources said.
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