In 2006, when the nation was at the height of its housing boom, Wachovia went on to acquire Golden West Financial Corp. - mortgage lender for $25-billion, and also inherited its deteriorating speciality $122-billion portfolio of Pick-a-Payment loans, which allows borrowers to skip payments and in large part, the possible cause of Wachovia's current problems.
 
But, Wachovia too like other banks stands to benefit from the government’s proposed $700 billion rescue plan.
 
Earlier this summer, Wachovia announced a slash in dividends and plans to cut 11,350 jobs, mostly in its mortgage business, after reporting a $9.11 billion loss for its second quarter.
 
As the credit crisis has deepened, financial industry seems to be consolidating itself, tie-ups that may restore confidence in the industry.  However, this could mean a few big lenders determining fees and interest rates on everything from home mortgages to credit cards to checking accounts, making it impossible for small and midsize banks to compete with these behemoths.
 
However, a Fargo Wells-Wachovia deal would mean the shifting of the banking industry power centre from New York.  JPMorgan’s buy-out of Seattle-based WaMu has it based in Manhattan, while Bank of America, which recently acquired Merrill Lynch, is based in Charlotte, N.C. and Wells looking to buy Charlotte-based Wachovia, is based in San Francisco.
 
Vikram S. Pandit, Chief Executive - Citigroup is personally overseeing talks with Wachovia, as it is a make-or-break deal for his bank’s consumer banking ambitions.  A Wachovia buy-out means Citigroup would gain a retail bank operation it has struggled for years to build, as well as, allowing it access to more stable customer deposits, without having to rely heavily on outside investor funds.  Failure to clinch the deal will leave Citigroup lagging behind Bank of America and JPMorgan Chase in domestic retail operations.
 
As for Wells, despite suffering big losses on mortgages and credit card loans, its relatively high lending standards have saved it from the crippling losses suffered by other of its big competitors.