Citigroup Rescues Wachovia's Bank Unit

Citigroup Inc., the biggest American bank by assets, will pay about $2.16 billion for banking operations of Wachovia Corp. after shares of the North Carolina lender collapsed under the weight of overdue mortgages.

While regulators said the Charlotte-based bank hadn't failed, Wachovia will lose its biggest unit and investors will get only about $1 a share for the bank, whose stock topped $59 in April 2006. All depositors will be protected, according to the Federal Deposit Insurance Corp., which helped broker the takeover by Citigroup.

Wachovia agreed to the stock-swap transaction just hours before the U.S. House of Representatives planned to vote on a $700 billion bank industry bailout. The package — which lawmakers rejected in an afternoon vote — was aimed at stopping the credit crunch that drove Lehman Brothers Holdings Inc. and Washington Mutual Inc. into bankruptcy and led to the hastily arranged rescues of Merrill Lynch & Co. and Bear Stearns Cos.