U.S. markets slide as bailout vote nears
NEW YORK, Sept. 29 (UPI) -- U.S. markets slid early Monday as Wachovia Corp. looked headed for a sale and Washington legislators moved closer to a vote on a $700 billion bailout plan.
U.S. regulators and Wachovia executives worked through the weekend to engineer a possible sale of the firm to either Citigroup or Wells Fargo. Meanwhile, the House scheduled a vote on the bailout plan, which is expected at midday.
The Dow Jones industrial average fell early, down 337.55 points, or 3.03 percent, to 10,805.58. The Standard and Poor's 500 fell 3.61 percent, 43.82 points, to 1,169.19. The Nasdaq composite index lost 83.96 points, 3.85 percent, to 2,099.19.
The benchmark 10-year U.S. Treasury bond rose 1 10/32 to yield 3.693 percent.
The dollar was mixed Monday. The euro fell to $1.4394, compared to $1.4626 Friday. Against the Japanese yen, the dollar was at 105.32 yen, down from 106.37 yen.
In Tokyo, the Nikkei average lost 149.55 points to 11,743.61, down 1.26 percent.
Citigroup to buy Wachovia at $1 per share
NEW YORK, Sept. 29 (UPI) -- Citigroup Inc. will purchase North Carolina's Wachovia Corp, for $2.2 billion or $1 per share, U.S. regulators said Monday morning.
The deal includes federal help. The Federal Deposit Insurance Corp. said it would absorb about $42 billion in Wachovia's losses in exchange for $12 billion in preferred stock and warrants from Citigroup, The New York Times reported.
The deal puts Citigroup on control of $400 billion in Wachovia deposits but not its AG Edwards brokerage or the Evergreen business, which Wachovia will retain, the Times said.
By absorbing Wachovia, Citigroup becomes one of the three largest banks in the country, joining Bank of America, which purchased Merrill Lynch recently, and JP Morgan Chase, which bought Washington Mutual last week.
With the purchase, Citigroup controls more than 30 percent of the country's banks deposits, the Times reported.
F.D.I.C. chairwoman Sheila Bair said, "there will be no interruption in services and bank customers should expect business as usual."
"This morning's decision was made under extraordinary circumstances with significant consultation among the regulators and Treasury," she said. "This action was necessary to maintain confidence in the banking industry given current financial market conditions."
Britain seizes Bradford & Bingley bank
LONDON, Sept. 29 (UPI) -- British regulators seized Bradford & Bingley Monday, taking control more than $90 billion in assets, and engineering a partial sale to a Spanish bank.
Banco Santander purchased Bradford & Bingley's $36 billion deposit business and 200 branch offices, which British Chancellor of the Exchequer Alistair Darling said would maintain "business as usual" The Times of London reported.
The government, however, took ownership of the bank's $74 billion mortgage portfolio, its treasury assets and wholesale liabilities, The Times reported.
Darling said taxpayers would be out $32 billion, most of it in a loan to the Financial Services Compensation Scheme, which ensures deposits.
Shareholders have likely lost their investment but depositors' money "remains absolutely safe and secure," the Treasury said.
Hedge funds having an edgy year
NEW YORK, Sept. 29 (UPI) -- The $2 trillion hedge fund market is headed for its worst year on record, various industry watchdog groups said.
Hedge Fund Research said the average hedge fund is down nearly 10 percent this year, The New York Times reported Monday. In addition, although hedge funds fail routinely, about 350 closed in the first half of 2008, a liquidation rate 24 percent higher than last year, the Times said.
As leaders in Washington vote on a $700 bailout plan for financial firms this week, Tuesday is a critical day for hedge funds, with many scheduled to permit investors to submit withdrawal requests on that day, the Times said.
"There could be a cascading effect, where redemptions cause other redemptions," James McKee, director of hedge fund research at Callan Associates, told the Times.
Not everyone believes the hedge fund market is in dire straights.
"It's clearly been a very tough year for investors in general. But I think hedge funds have done a good job of navigating very tough markets and don't get the type of recognition that they should," said David Smith, chief executive officer of Coast Asset Management in Santa Monica, Calif., said to the newspaper.
