Wells Fargo offer is stock swap for holding company and all subsidiaries. Citigroup offer is cash and credit for Wachovia Bank. Both Wells Fargo and Citigroup are bank holding companies whose markets are OCC, FDIC valued "core bank", top five consolidated assets.

Bloomberg

Citigroup, led by Chief Executive Officer Vikram Pandit, dropped as much as 15 percent in New York trading after San Francisco-based Wells Fargo said it would buy Wachovia in an all- stock transaction. Citigroup announced a $2.16 billion offer for parts of the company four days ago.

"Citi has substantial legal rights regarding Wachovia and this transaction," the New York-based company said in a statement. "Wachovia's agreement to a transaction with Wells Fargo is in clear breach of an exclusivity agreement between Citi and Wachovia."
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"The FDIC stands behind its previously announced agreement with Citigroup," 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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The Wells Fargo transaction values Charlotte, North Carolina-based Wachovia, led by CEO Robert K. Steel, at $7 a share, the companies said in a joint statement today. Wachovia traded at $6.80, up 74 percent from yesterday. Wells Fargo rose 8 percent to $38.16.

More GS games, promised shareholder dilution

"It provides superior value compared to the previous offer to acquire only the banking operations of the company," Richard Kovacevich, 64, chairman of San Francisco-based Wells Fargo, said in a statement. "Wachovia shareholders will have a meaningful opportunity to participate in the growth and success of a combined Wachovia-Wells Fargo that will be one of the world's great financial services companies."

Wachovia shareholders get 0.1991 shares of Wells Fargo common stock for each share they own. Wells Fargo expects charges related to the acquisition of about $10 billion, and the company said it will issue as much as $20 billion of new securities, mostly common stock.

PR claims Wells Fargo is "saving" taxpayer funds. That is a specious argument. Further, if Wells Fargo passes the judicial test despite Citigroup's contract, the legitimacy of "taxpayer equity" claimed by Paulson's extraordinary authorities in the Bailout Bill is effectively void. (Which isn't to understate the arbitrary powers extended to Treasury's agents in principle and in any event.) International investors will balk at risking capital for any equity claims on US-domiciled banks.

Diversity is the key to economic and political evolution.