In the latest byproduct of the widening global financial crisis, Citigroup Inc will acquire the banking operations of Wachovia Corp in a deal facilitated by the government agency that insures the country's bank deposits.

Citigroup will absorb up to $42 billion of losses in the deal, with the Federal Deposit Insurance Corp (FDIC) covering any remaining losses, the government agency said yesterday. Citigroup also will grant the FDIC $12 billion in preferred stock and warrants.

The deal greatly expands Citigroup's retail outlets and leaves it among the US banking industry's Big Three along with Bank of America Corp and JP Morgan Chase & Co.

Wachovia has been among the banks hardest hit by the ongoing crisis in the mortgage market.

It paid about $25 billion for Golden West at the height of the nation's housing boom. With that purchase, Wachovia inherited a deteriorating $122 billion portfolio of Pick-A-Payment loans, Golden West's specialty, which let borrowers skip some payments.

(Agencies via China Daily September 30, 2008)