Wachovia Bank seeking merger partners

CHARLOTTE, N.C., Sept. 27 (UPI) -- Financially troubled Wachovia Corp., the fourth-largest U.S. bank, has entered into merger talks with possible U.S. and Spanish partners, sources say.

Wachovia, of Charlotte, N.C., has massive exposure to exotic adjustable-rate mortgages and is one of the hardest-hit banks in the collapse of the U.S. housing market. Now it is seeking a lifeline by negotiating possible merger deals with Wells Fargo, Citigroup and Spain's Banco Santander, The New York Times reported Saturday.

Wachovia inherited $120 billion in "option ARM" mortgages through its ill-timed acquisition of Golden West, a big California mortgage lender, at the end of the housing boom in 2006, analysts said.

Unnamed sources told the Times that merger talks are at early stages, but it appeared Wachovia was seeking merger alternatives if a $700 billion financial industry bailout plan being debated by Congress fails to provide enough help.

Wachovia's share price, down nearly 80 percent in the last year, plunged 27 percent Friday to $10 per share after Washington Mutual, a similarly troubled bank, was seized by the federal government.