Michael Gracie

Citigroup thought it had Wachovia in the bag - a couple of billion and an FDIC backstop seemed quite the rosy deal. Now Wells Fargo has come along and offered $15 billion, without discernible government assistance.

What does Citigroup do about this? Whine like sissies while hiding behind their lawyers.

Citi is a member of the private club in the burbs, and they just got walloped by the scratch player that hangs around the municipal course. It’s not apparent whether Citi had a breakup fee in the deal, but if they didn’t they should fire their lawyers.

If they proceed to court, everyone should ask themselves why Citi couldn’t do something without government guarantees. And whether they want their tax money backing Citi’s thinly veiled turnaround plan.

UPDATE: WFC gets to accelerate use of Wachovia losses. Take it for what it’s worth: on one hand, this means the deal still ostensibly uses government money - on the other hand, it means Wells Fargo expects to have some earnings.

UPDATE 2: Whining works for now - Citi Granted Emergency Injunctive Relief Extending Exclusivity Agreement between Citi and Wachovia.

Some might say “ouch” over a 23% reduction in size. But shedding non-core and/or underperforming assets is part of Turnaround 101. I wouldn’t be surprised if CEO Vikram Pandit’s plan works.

Shrinking isn’t necessarily bad.

UPDATE: Forbes - “The bank’s new chief begins the slow, painful job of undoing his predecessor’s work.”

No pain, no gain?