Wells Fargo & Co. has agreed to pay $100 million to Citigroup Inc. to settle a dispute related to its acquisition of Wachovia Corp. in October 2008, at the height of the financial crisis.
Wachovia was teetering on the brink of collapse from bad real estate loans when it initially agreed to be bought by Citigroup in a deal supported by the U.S. government. Days later, Wells Fargo swooped in with a sweeter deal and snatched Wachovia away from Citigroup. An irate Citigroup sued Wells Fargo soon thereafter, leading to the settlement announced Friday.
Citigroup, in its lawsuit filed in the New York State Supreme Court in Manhattan, accused Wells Fargo and Wachovia of breach of contract and sought $60 billion in damages.
The loss of Wachovia provided a window into Citigroup’s own weak position at the time. In the weeks following the deal, Citigroup itself was brought to its knees as losses from bad investments mounted.
Citigroup took in a total of $45 billion in bailout money from the U.S. government. The government has been reducing its stake in the bank this year, but still owns about 12 percent of Citigroup.
The $100 million settlement represent a small fraction of the earnings and cash hoard of San Francisco-based Wells Fargo, which is one of the largest banks in the U.S. Wells Fargo earned $3.15 billion in the third quarter and had $16 billion of cash on its balance sheet as of Sept. 30. Its shares edged up 2 cents to $27.53 in afternoon trading Friday.