Citigroup gains a point in Wachovia deal

Citigroup (NYSE: C) claims it has gotten a judge to block a potential merger between Wachovia (NYSE: WB) and Wells Fargo (NYSE: WFC). The big New York bank claims it had a deal to snap up WB, and was done wrong.

According to The Wall Street Journal (subscription required), "State Supreme Court Justice Charles Ramos issued the order blocking the sale of Wachovia Corp., which Wells Fargo & Co. had agreed to purchase in a $14.8 billion deal."

The FDIC says it will step in to help resolve the issue. But, the question is "who is served" by the broader implications of the fight. Having three of the nation's largest financial firm in a dispute during the greatest banking crisis in decades would push Wachovia, already troubled, into greater peril while the fight goes on. It could continue for months when fast action may be the only way to keep Wachovia from failing.

The Treasury has already intervened by pushing banks to merge and nationalizing or taking large financial stakes in companies including AIG (NYSE: AIG). It needs to step into the Wachovia situation before the bank gets into such deep trouble that it is not worth buying.

Douglas A. McIntyre is an editor at 245wallst.com.