Citigroup will acquire Wachovia

Citigroup will acquire the banking operations of Wachovia bank, in a deal facilitated by the Federal Deposit Insurance Corp.

Citigroup will absorb up to $42 billion of losses in the deal, while the Federal Deposit Insurance Corp. will cover any remaining losses. Citigroup also will grant the FDIC $12 billion.

The premises of the transaction are that Wachovia would not fail, that all depositors are protected and there will be no cost to the Deposit Insurance Fund.

The sale of Wachovia comes after the governmenti's seizure of Seattle-based Washington Mutual Inc. — the largest bank failure in U.S. history. Even as details of its takeover unfolded, Wachovia shares plunged 87 percent in Monday premarket trading to $1.36. The stock had closed Friday at $10, down 74 percent for the year.

Citigroup was in competition with Wells Fargo and Spaini's Banco Santander for the struggling bank.