wachovia, case memorandum to board of directors (15 pages)
DESCRIPTION
After the complaint in Vern McKinley v. FDIC and Board of Governors of the Federal Reserve was filed the FDIC provided a previously undisclosed case memorandum supporting the minutes. This case memorandum is heavily redacted and contains roughly 2 pages out of the 11 pages of the body of the memorandum. The other approximate 9 pages are redacted.TRANSCRIPT
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MEMORADUM:
THROUGH:
FROM:
SUBJECT:
Recommendation
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September 29,2008
The Board of Directors . ~Mitchell L. Glassman, Director ~ ~Division of Resolutions and Receiverships
Sandra L. Thompson, Director c8 \ 1L~Division of Supervision and Consumer Protection
James R. Wigand, Deputy Director ~Franchise and Asset Marketing BranchDivision of Resolutions and Receiverships
Herbert J. Held, Assistant Directo"~~Franchise and Asset Marketing B~J?'Division of Resolutions and Receiverships
Wachovia Ban, National Association, Charlotte, North CarolinaWachovia Mortgage, FSB, Nort Las Vegas, NevadaWachovia Ban, FSB, Houston, TexasWachovia Ban of Delaware, National Association, Wilmington, DEWachovia Card Services, National Association, Atlanta, Georgia
Wachovia Corporation (Ban Holding Company) Information(As of June 30, 2008):
Tota Assets: $781,883,478,000
Tota Deposits (including Foreign): $475,172,374,000Uninsured Deposits: $157,100,000,000
Foreign Deposits: $53,170,000,000Tier 1 Leverage/Total Risk Based (Lead Ban): 6.27%/11.58%
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Executive Sumar
Wachovia Ban, NA (Bank) is a nationally charered ban founded in 1879 that is wholly
owned by Wachovia Corporation, a financial holding company regulated by the Federal Reserve.
The Ban is the four largest ban in the countr and the predominant legal entity withn
Wachovia Corporation, representing 83 percent of consolidated holding company assets. The
insured legal entities ofWachovia Corporation consist of
thee national bans and two Federal
savings bans. Other significant holding company subsidiares include Wachovia Capital
Markets, LLC, and Wachovia Securities, LLC. The Ban operates approximately 3,400 banng
centers in 21 states, primarily along the eastern and gulf coasts and in Californa, and engages in
foreign activities. ~ - ....
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Based on the analysis ofCitigroup's proposal, staff
recommends accepting the Citigroup,
Inc. bid to resolve the five insured depository institutions and to resolve the systemic risk posed
by a possible failure of Wachovia Corporation and its affliate bans and thrfts.
Supervisory History and Condition
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Supervisory History
The insured legal entities ofWachovia Corporation are shown in the table below.
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Wachovia Bank, NA---
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The Ban's former chief executive offcer, Ken Thompson, was removed on June 2,
2008, and Robert Steel was selected as his replacement on July 9, 2008. The Ban's chief
financial offcer and chief risk offcer were also subsequently replaced. ,
Wachovia Mortgage FSB and Wachovia Bank FSB
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Wachovia Bank of Delaware NA and Wachovia Card Services
Wachovia Ban of Delaware NA represents a more traditional institution with no pay-
option ARM exposure. Likewise, Wachovia Card Services is a recently formed credit card
lending operation.
Marketing
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On Septembe 28, 2008, FDIC staff
began discussions with CitigrouP and Wells Fargo,
both of which submittd bids to the FDIC on the same day. Both bids sought open ban
assistace from the FDIC..a ~ ~ ..-- -~ .---_.___.......A
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The CitigrouP bid requests tht the FDIC provide loss sharg on a $312 bilion pool of
assets. Losses would be sbaed as follows: (i) the first $30.0 bilion oflosses in the pool.
CitigruP asswes i 00 percent, and (ii) CitigruP assumes $4 bilion a year of losses for the
years. Additionally , FDIC will recive face value of $12 bilion in preferrd stock and waants.
However, based upon
the tcos of the CitigrouP proposal, these losses would be absorbed by CitigruP and result in no
loss to the Deposit Insurance Fund.
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Systemic Risk
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Conclusion
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Other Information
If you have any questions concerning this case, please call Herbert Held at extension
br Sharon Yore at extension
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This recommendation is prepared by:
Sh~~lVFranchise and Asset MarketingDRR - Washington
This recommendation is supported by:
George FrenchDeputy Director, DSC
~r~.L--~a A. Kelsey / or -
General Counsel
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bßRESOLUTION - Citiban
WHEREAS, sta has advised the Board of Directors ("Board") of the Federal
Deposit Insurance Corporation ("FDIC") that Wachovia Ban, National Association,Charlotte, Nort Carolina, Wachovia Mortgage, FSB, North Las Vegas, Nevada,Wachovia Ban of Delaware, National Association, Wilmington, Delaware, WachoviaBan, FSB, Houston. Texas. and Wachovia Card Services, National Association, AtlantaGeorgia ("Bans"), and
WHREAS, the Division of Resolutions and Receiverships ("DRR") has.bids from finan ' and'.-WHEREAS, DRR has i:
B. and
WHEREAS, a proposal for the resolution of the Bans without the appointmentof the FDIC as receiver has been received from Citigroup, Inc., New York, New York("Citi"), which involves the merger or consolidation of
the Bans with another insured
depository institution or the sale of any or all of the assets of the Bans or the assumptionof any or all of the Bans' liabilties by another insured depository institution, or theacquisition of the stock of the Bans, any of which would benefit the shareholders of theBans and except under limited circumstaces is precluded by Section 1 1
(a) (4)(C) of the
Federal Deposit Insurance Act, as amended ("Act"), 12 U.S.C. l821(a) (4)(C); and
WHEREAS, the Board has been advised that the
WHEREAS, staf has presented to the Board information indicating theliquidation of the Bans under Section 11 of the Act, 12 U.S.C. 1821, would have serious
adverse effects on economic conditions or financial stability; and
WHEREAS, staff has advised that assistance to the Bans under Section l3( c) ofthe Act, 12 USC 1823(c)(1), without the appointment of
the FDIC as receiver will avoid
or mitigate the serious adverse effects on economic conditions or financial stability; and
WHREAS, staffhas advised that severe financial conditions exist whichtheaten the stability of a significant number of insured depository institutions or ofinsured depository institutions possessing signficant financial resources and the Bansare insured depository institutions under such threat of instability.
NOW, THEREFORE, BE IT RESOLVED, that by the vote of at least two-thrdsof the members of the Board, the Board finds that the liquidation of the Bans, as well asthe likely consequent failure ofWachovia Corporation, would have serious adverseeffects on economic conditions or financial stabilty and would create systemic risk tothe credit markets.
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BE IT FURTHER RESOLVED, that by the vote of at least two-thrds of themembers of the Board, the Board finds that the proposal received from Citi whichinvolves the merger or consolidation of the Bans with another insured depositoryinstitution or the sale of any or all of the assets of the Bans or the assumption of any orall of the Bans' liabilities by another insured depository institution, or the acquisition ofthe stock of the Bans and which requires the provision of assistance under SectionB( c )(2) of the Act, 12 USC i 823( c )(2), in the form ofloans to, deposits in, the purchaseof assets or securties of, the assumption of liabilities of, guarantees against loss to, orcontrbutions to, the Bans or their acquiror will mitigate the serious adverse effects oneconomic conditions or financial stability that would be caused by the Bans' failure.
BE IT FURTHER RESOLVED, that severe financial conditions exist whichtheaten the stability of a significant number of insured depository institutions or ofinsured depository institutions possessing significant financial resources and the Bansare insured depository institutions under such threat of instability and that the Board taesths action in order to lessen the risk to the Corporation, and systemic risks, posed by theBans, and that the proposal by Citi wil do so in the least costly of all availablemethods..
BE IT FURTHER RESOLVED, the Board hereby authorizes the Chairman, orher designee, to provide the wrtten recommendation to the Secretar of the Treasurspecified under Section 13(c)(4) (G)(i) of the Act, 12 USC 1823(c)(4)(G)(i).
BE IT FURTHER RESOLVED, the Board hereby authorizes the Director, DRR,or his designee, and all other FDIC staff to tae all appropriate action to implement theprovision of assistace authorized hereunder, including but not limited to: credit supportin the form of loan guaantees, the purchase of warants, and loss sharng; and to take anyother action necessar and appropriate in connection with this matter.
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