Federal Regulators Ask Nation's 4th Largest Bank, Wachovia, To Find Buyer

New York, NY (AHN) - U.S. federal regulators have reportedly asked Wachovia Corp. (NYSE: WB) to sell itself, the bank is the nation's fourth largest by assets, but it is in trouble over loans to developers and homeowners and holds a huge portfolio of so called pay-option mortgages.

The Federal Reserve and Treasury Department has asked the U.S.'s fourth largest bank by asset to put itself up for sale amid reports that the firm was already in preliminary talks with three banking giants.

The market analyst are speculating that it will rather sell itself to Citigroup Inc. (C) or Wells Fargo & Co. (WFC) rather than to Spain's Banco Santander SA.

Wachovia's sale to Citigroup or Wells Fargo has the capacity to give consumers much fewer banking options. Such a sale would boost either of those banks to a position on par with banking giants, Bank of America and JP Morgan Chase, and place those two banks, along with whichever bank bought Wachovia, in a position of controlling 30 percent of U.S. banking deposits.

Once one of the financially soundest and best-managed banks in the nation, the Charlotte, N.C.-based Wachovia reportedly has been looking for a bailout buyer since just a day after Washington Mutual Inc. (WM) was seized by the Federal Deposit Insurance Corporation (FDIC) in the country's largest bank failure ever.

Washington Mutual was then sold to JPMorgan Chase for $1.9 billion for its insured deposits, assets and some liabilities of firm's banking operations.

Wachovia had recently announced that it plans to raise as much as $20 billion in capital from investors to shore up its finances. But it reportedly started looking for a buyer after its stocks lost significant amounts of their value following recent tumults.

The company suffered after it acquired a California lender Golden West Financial Corp., a firm specializing in payment-option adjustable-rate mortgages, for $24 billion.

On Friday, shares of Wachovia, which may be a potential casualty of the financial crisis, plunged by $3.70, or 27 percent, to close at $10 in the New York Stock Exchange composite trading.

Over the last week, the firm's shares tumbled by 47 percent.