Paulson Says Wachovia Was Systemic Risk

After the Federal Deposit Insurance Corporation (FDIC), Federal Reserve and U.S. Treasury facilitated the acquisition of Wachovia by Citigroup, U.S. Treasury Secretary Henry Paulson said the failure of Wachovia posed a systemic risk to the U.S. economy, and he praised the FDIC's handling of the situation.

"I commend the action taken by Chairman Bair and the FDIC today to facilitate the sale of Wachovia Bank to Citigroup in an orderly fashion to mitigate potential market disruptions," said Paulson. "The FDIC's actions help to mitigate potential systemic risk to our financial system."

All of Wachovia's deposits are protected and the move should help limit the financial market disruptions, added Paulson.

The Treasury Secretary pledges to continue taking all necessary measures to help protect the U.S. financial system and economy.

The news comes just as the U.S. Emergency Economic Stabilization Act reaches the House floor on Monday for vote. Assuming it passes, the bill could give the Treasury the authority to purchase up to $700 billion in various illiquid assets in the U.S. financial system.

By Erik Kevin Franco and edited by Sarah Sussman
©CEP News Ltd. 2008