Reversals of Fortune: House Passes Bailout; Wells Trumps Cit

The new and improved $700 billion federal bailout plan was put to a vote earlier this afternoon when the plan’s proponents believed there were enough yays to pass it—and it turned out they were right, as the bill just passed, 263-171 (two thirds of the House Democrats and a little less than half of the Republicans voted in favor; about 30 in each party reversed their nay votes from Monday). The plan, which passed the Senate Wednesday, will now be handed over to President Bush, and once he signs it, the bailout games will begin—that is, the buying up of bad mortgage loans.

This is good news, of course, to the banks (and their employees) carrying said loans, as the deal hopes to strengthen balance sheets, preventing bank failures while increasing banks’ ability to borrow from each other and lend to consumers thus spurring on the economy. Time will tell how that all plays out, but the markets seem to be betting on an upturn, as the major indices all rose today, before and after the bill passed.

In another reversal of fortunes, this morning it was announced that Wells Fargo had agreed to buy Wachovia for $15 billion, stopping many industry observers (including this one) in their tracks to ask themselves, ‘Wait a minute, didn’t Citi just buy that ailing bank other day for $2 billion?’ Citi was no doubt asking itself the same question, and the answer was ‘Yes, sort of.’

Indeed, Citi recently agreed to a couple billion dollar deal with Wachovia, but the offer only included Wachovia’s banking operations, not its brokerage and assset management units. The Wells deal, however, covered the whole shebang, thus the announcement this morning and thus the significantly higher per-share purchase price: $7 versus Citi’s $1.

Unsurprisingly, Citi wasn’t pleased and is contesting the deal, saying, in so many words, ‘Hey, man, we shook on it.’ The FDIC, which brokered Citi’s deal but had nothing to do with the Wells offer (Wells was quick to say, ‘We did this on our own—with no government hands.’), also issued a statement to the effect that it thought the Citi deal was a done one, though it also added it will be taking a close look at both offers and will be “working with the primary regulators of all three institutions to pursue a resolution that serves the public interest.”

If ‘public interest’ includes ‘Wachovia shareholders,’ it looks like Citi is in some trouble: if the Wells-Wachovia deal does go through, the new and improved West Coast-based Wells Fargo, thanks to the deep deposit pockets of East Coast-based Wachovia, will have 30 percent of all the consumer deposits in the U.S., leaving Citi out of the big three (Bank of America and JPMorgan Chase being No. 1 and No. 2, respectively, in consumer deposits).

Citi CEO Vikram Pandit and his team aren't pleased (to say the least), but it is good news to a lot of Wachovia employees, not just those who own their company’s stock (whose price has rise more than 60 percent today; Wells Fargo’s shares have also risen but Citi’s are off more than 10 percent). Wachovia’s brokerage and asset management employees likely feel a lot safer about their jobs now that a deal might include them, and with little geographic crossover among the consumer operations of Wachovia and Wells (both are strong on respective coasts) there’s likely to be fewer jobs cut if regulators smile on their marriage. Still, do not expect to Vikram to sit down quietly and hold his peace.

Lastly, it looks like more Lehman bankers have found new homes, the folks behind the social networking site Who Killed the Bear? have created a similar one for ex-Lehmanites called The Lehman Family, and in honor of today’s historic vote and yesterday’s only vice presidential debate, here’s a vote you can rock yourself: Which Joe came out on top last night, Say It Ain’t So Sixpack or Biden?