The Battle for Wachovia

" Take the wisdom of king Solomon to sort out the Wachovia feels like a little what. That we're turning to some banking and legal experts throughout the morning joining us is Elizabeth no Wiki associate professor of law at Tulane university and pat apple and apple like consulting. And litigation services good morning to the two of you thanks so much for being here. You know would start with you pat on this what has a more legitimate case war. How I think he's changed because of what we're talking about the language that was signed into law on Friday. Or new accounting law coming at the treasury secretary's office on Tuesday. It explains a -- of the mechanics here."

" But Alexis are so many things that come into play here there's so many exterior factors. Quite frankly I think this thing's going to settle the vast majority of the of these cases. They wind up in litigation especially in the banking arena in them getting settled there's a lot of incentive. For this thing to get settled you've you've now got two. 400 pound gorillas involved in the mix she got the Federal Reserve the FDIC. There's there's the perception. That the wells deal is is a much more favorable deal obviously for for Wachovia stockholders. As well as is the the government's not involved in in the backstop as they are with the with the city -- deal. But that's what I think we'll probably happened there there appears to be a lot of pressure to get this thing settled. And that's what I expect to happen."

" You know a little bit I imagine that the way this is going to play out in court is that they hope it doesn't come to that and that they hope you know some kind of mutual agreement is dealt with today. But at least the deet tails of what we're seeing here involved the FDIC getting involved. At just this past Thursday in saying go back to the bargaining table with Wells Fargo. While I deals already in place -- city now I understand they were protecting the FDIC. But how much does the federal role in this play into -- court decision."

" That's a great question and and we don't know because we've never been in this exact position before. I don't necessarily think the court's going to give a whole lot of weight to the FDIC's position. We have binding agreements right the exclusivity agreement is binding. So while the FDIC's view is important -- from the standpoint of the banks were going to have to deal in some capacity would the FDI CNN going forward basis. I'm not sure from a legal standpoint. The courts are going to give a whole lot of weight. To the FDI fees view again particularly in light of an unambiguously. Exclusivity agreement. That contrary to Adams points. -- not likely to be struck down in full the act passed on Friday. Does not say that exclusivity agreements are void rather. It says that deal jumpers such as Wells Fargo cannot be sued. By prior bidders Citigroup for jumping deal that's what the act passed on Friday it says."

" I felt pat you know listen we're getting a lot more details throughout the weekend on this and and and is it as Elizabeth just talked about about this exclusivity agreement. Isn't there a way each year for this to settle for both parties where. It -- it basically nobody's culpable for responsibility but assets are split up an is that the most favorable solution here because when you find happened -- Citigroup not only made this deal on Monday. But eighteen is really as Wednesday and even big city entire financial institutions so they say with the with the maybe a couple pieces missing. And then all of a sudden Wells Fargo -- and so eat it it definitely. Two weeks of something I don't know what it it."

" Well it's certainly a moving a situation that's very fluid. It's it's something that these types of deals. When -- when there's. Troubled financial institution involved. Many times are put together in and would would not too much advance notice. It's it yeah there's I believe there is a way that this could be. Mutual mutually beneficial to all parties and get resolved but it's it's certainly as you say. A fluid situation it's changing every minute."

" And a little bit let's not forget that is an affidavit signed by -- head of Wachovia bank Robert Steele who used to work with the treasury office. He basically said there were multiple times where Wachovia bank was on the brink of going out of business. He walked through the timeline of what happened here. What in this situation does this mean for the -- or the FDIC in their ability. To continue to find larger stronger financial institutions to help -- you look smaller financial institutions in the future. And not make it tax fair responsible for the Mac some what they need to demonstrate right now."

" You're absolutely right and and that's exactly the point the way this plays out is going to have huge implications for how troubled banks are dealt with in future. You're absolutely right that the affidavit filed by steel on Sunday was shocking. Because it was said both in that affidavit and complaint filed by Wachovia that the F yet he was ready to seats Wachovia. City -- swooped in at the last minute to bail out Wachovia. This begs the question you raised earlier. Do we want the Citigroup deal with Wachovia completely scuttled because what's going to happen in the future we're not going to see other banks like Citigroup. Stepping in at the last minute and say -- failed bank from falling to the fat. I want you -- their bigger implications."

" Yet this is that I add it to me just a remarkable story Elizabeth and pat thank you for. -- an out for us we're going to continue to talk about this throughout the morning because as we mentioned last Friday. Citigroup how to deal with Wachovia bank last Monday to purchase their banking operations it was. Funneled through -- basically put together by the FBI -- Friday Wells Fargo walks and says they're buying all walk Soviet bank and the city deals and Allen Boyd -- Legal battle convenience are coming."