A settlement may be close in the battle of whether Citigroup (NYSE: C) or Wells Fargo (NYSE: WFC) ends up owning Wachovia (NYSE: WB). Wells Fargo came in with what was considered a winning bid after Citi thought it already had a deal.

An appellate court has ruled against a stay requested by Citi. Most investors and the Wachovia board appear to think the Wells Fargo deal is better for investors. It also does not involve money from the FDIC which the Citi purchase did. That has to be attractive to the government.

To get the fighting over, it appears that Wells Fargo will get about 75% of the WB deposits and Citi will get the rest. According to Reuters, "Analysts said it may make sense for Citigroup to get at least some assets in the transaction because the bank worked with the FDIC on the deal and supported Wachovia financially last week."

But, with the banking industry falling apart, does either bank want Wachovia? Its assets, especially mortgage-backed paper, could be falling in value every day. Some bank stocks were down as much as 20% yesterday on concerns about their liquidity and ability to stay in business.

Citi and Wells Fargo may be better off letting Wachovia fail and picking up the pieces at a fire sale. It has become that dangerous to be a big US bank taking on assets which could potentially have huge problems. Honoring deals has become a thing of the past. Fear has trumped honor

Douglas A. McIntyre is an editor at 247wallst.com.

Wells Fargo may get 75% of Wachovia: does it want it? originally appeared on BloggingStocks on Wed, 08 Oct 2008 10:50:00 EST. Please see our terms for use of feeds.

During the recent testimony by Fed Chairman Ben Bernanke, Treasury Secretary Hank Paulson and SEC Chairman Christopher Cox, it has become increasingly clear that the Federal Reserve will be forced at least in the near term to extend a financial lifeline to any and all U.S. financial entities that are too big to fail. This refers to entities whose failure cold endanger the U.S. economy and in some cases the global financial markets.

I have learned during my investment career to watch what the Fed does much more than what it says. This has been demonstrated by Chairman Bernanke's extension of the discount window to Fannie Mae and Freddie Mac in recent days despite initial indications by Secretary Paulson to the contrary. Hawkish talk remains just that, not action.

The discount window was initially intended only for regulated banks to prevent a meltdown of the financial system from bank failures. In return for this financial insurance, banks are regulated, including the charging of fees. One can debate the alternatives to such an arrangement. However, this regulatory framework will probably be with us for the foreseeable future.

Continue reading Dear Fed: If it acts like a bank, regulate it like a bank!

Dear Fed: If it acts like a bank, regulate it like a bank! originally appeared on BloggingStocks on Wed, 16 Jul 2008 15:33:00 EST. Please see our terms for use of feeds.