Wachovia, Case Memorandum To Board Of Directors (15 Pages)

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iiATtRiAL REDACTED

September 29,2008

MEMORADUM:

The Board of Directors . ~

THROUGH:

Mitchell L. Glassman, Director ~ ~ Division of Resolutions and Receiverships

Sandra L. Thompson, Director c8 \ 1L~ Division of Supervision and Consumer Protection FROM:

James R. Wigand, Deputy Director ~ Franchise and Asset Marketing Branch Division of Resolutions and Receiverships

Herbert J. Held, Assistant Directo"~~ Franchise and Asset Marketing B~J?' Division of Resolutions and Receiverships SUBJECT:

Wachovia Ban, National Association, Charlotte, North Carolina

Wachovia Mortgage, FSB, Nort Las Vegas, Nevada Wachovia Ban, FSB, Houston, Texas Delaware, National Association, Wilmington, DE Wachovia Ban of Wachovia 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): $475,172,374,000 Uninsured Deposits: $157,100,000,000

Foreign Deposits: $53,170,000,000 Tier 1 Leverage/Total Risk Based (Lead Ban): 6.27%/11.58%

--Recommendation

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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 thee national bans and two Federal insured legal entities ofWachovia Corporation consist of

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

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foreign activities.

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recommends accepting the Citigroup, Based on the analysis ofCitigroup's proposal, staff

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 payoption ARM exposure. Likewise, Wachovia Card Services is a recently formed credit card lending operation.

Marketing

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began discussions with CitigrouP and Wells Fargo, On Septembe 28, 2008, FDIC staff

both of

which submittd bids to the FDIC on the same day. Both bids sought open ban

assistace from the FDIC. _.___.......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:

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Franchise and Asset Marketing DRR - Washington

This recommendation is supported by:

George French Deputy Director, DSC

~r~.L-~a A. Kelsey / or General Counsel

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¡nluE~~¡~'L ADPf(il:O

bß RESOLUTION - 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, Delaware, National Association, Wilmington, Delaware, Wachovia Wachovia Ban of Ban, FSB, Houston. Texas. and Wachovia Card Services, National Association, Atlanta

Georgia ("Bans"), and

WHREAS, the Division of Resolutions and Receiverships ("DRR") has.

bids from finan ' and'.WHEREAS, DRR has i: and

B.

WHEREAS, a proposal for the resolution of the Bans without the appointment of

the FDIC as receiver has been received from Citigroup, Inc., New York, New York

the Bans with another insured

("Citi"), which involves the merger or consolidation of

depository institution or the sale of any or all of the assets of the Bans or the assumption

of any or all of the Bans' liabilties by another insured depository institution, or the acquisition of the stock of the Bans, any of which would benefit the shareholders of the the (a) (4)(C) of Bans and except under limited circumstaces is precluded by Section 1 1

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 the the Act, 12 U.S.C. 1821, would have serious the Bans under Section 11 of adverse effects on economic conditions or financial stability; and liquidation of

WHEREAS, staff has advised that assistance to the Bans under Section l3( c) of the FDIC as receiver will avoid the Act, 12 USC 1823(c)(1), without the appointment of or mitigate the serious adverse effects on economic conditions or financial stability; and

WHREAS, staffhas advised that severe financial conditions exist which theaten the stability of a significant number of insured depository institutions or of insured depository institutions possessing signficant financial resources and the Bans

are insured depository institutions under such threat of instability.

NOW, THEREFORE, BE IT RESOLVED, that by the vote of at least two-thrds of the members of the Board, the Board finds that the liquidation of the Bans, as well as

the likely consequent failure ofWachovia Corporation, would have serious adverse effects on economic conditions or financial stabilty and would create systemic risk to the credit markets.

BE IT FURTHER RESOLVED, that by the vote of

at least two-thrds of

the

members of the Board, the Board finds that the proposal received from 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 assumption of any or

the Bans' liabilities by another insured depository institution, or the acquisition of the stock of the Bans and which requires the provision of assistance under Section all of

B( c )(2) of the Act, 12 USC i 823( c )(2), in the form ofloans to, deposits in, the purchase

of assets or securties of, the assumption of liabilities of, guarantees against loss to, or contrbutions to, the Bans or their acquiror will mitigate the serious adverse effects on economic conditions or financial stability that would be caused by the Bans' failure. BE IT FURTHER RESOLVED, that severe financial conditions exist which theaten the stability of a significant number of insured depository institutions or of insured depository institutions possessing significant financial resources and the Bans are insured depository institutions under such threat of instability and that the Board taes

ths action in order to lessen the risk to the Corporation, and systemic risks, posed by the Bans, and that the proposal by Citi wil do so in the least costly of all available methods.. BE IT FURTHER RESOLVED, the Board hereby authorizes the Chairman, or her designee, to provide the wrtten recommendation to the Secretar of the Treasur the Act, 12 USC 1823(c)(4)(G)(i). specified under Section 13(c)(4) (G)(i) of

BE IT FURTHER RESOLVED, the Board hereby authorizes the Director, DRR, to tae all appropriate action to implement the provision of assistace authorized hereunder, including but not limited to: credit support or his designee, and all other FDIC staff

in the form of loan guaantees, the purchase of warants, and loss sharng; and to take any other action necessar and appropriate in connection with this matter.

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