Wachovia in talks with Citigroup

There's been a lot of nervousness about Wachovia of late. The bank's CDS spreads have been rising, which is really pressuring its stock. With the ghost of Washington Mutual hovering near, there is a palpable sense that Wachovia needs a merger. Morgan Stanley seems to be off the table for now. But the bank has opened talks with Citigroup, reports the New York Times and other outlets. It has also put out some feelers, to Wells Fargo and Banco Santander, among others. The big issue is its large portfolio of option ARM mortgages--very toxic. The bailout plan will certainly help it, but the particulars of the deal will be relevant to any buyer. They may result in big losses to sellers. Once again, it comes down to how individual securities ultimately get valued.

For more:
- here's an article in the New York Times
- its switch to a new ad agency raises brows. Article

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