Wells Fargo and Citigroup have started a game of tug of war over Wachovia.


Wells Fargo earlier today announced that it had agreed to buy Wachovia for more than $16 billion, routing a U.S. government-backed Citi bid for some of Wachovia’s assets. Citi has now demanded that Wells Fargo and Wachovia terminate the agreement, saying it breached an exclusive deal Citi reached earlier this week, according to Bloomberg.


A Citi statement said, “Citi has substantial legal rights regarding Wachovia and this transaction. Wachovia’s agreement to a transaction with Wells Fargo is in clear breach of an exclusivity agreement between Citi and Wachovia.”


Citi offered $2.16 billion for parts of Wachovia four days ago. It received backing from Federal Deposit Insurance Corp. If the Citi and Wachovia deal goes through, it would have push the New York- based lender to third place among U.S. bank networks, behind Bank of America and JPMorgan Chase.


“The FDIC stands behind its previously announced agreement with Citi,” FDIC Chairman Sheila Bair said in a statement today. “The FDIC will be reviewing all proposals and working with the primary regulators of all three institutions to pursue a resolution that serves the public interest.”

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