WachFargovia Bank?

He said. She said. Yup, it's a fight by CitiGroup and Wells Fargo for Wachovia. I remember when Wells Fargo swallowed up First Interstate Bank in the 90s, and it was a big mess combining accounts and computer systems (during which time deposit amounts could mysteriously increase or decline), but I'm sure technology has improved since then. From a Bloomberg story:

- Wells Fargo & Co. offered $15 billion for Wachovia Corp., setting up a contest with Citigroup Inc. for control of the embattled North Carolina lender.

Citigroup demanded Wells Fargo abandon the takeover, claiming it breaches an exclusive deal reached earlier this week in which the New York-based lender agreed to buy Wachovia's banking operations for $2.16 billion with government help.

Well Fargo's surprise offer for Wachovia, run by former U.S. Treasury official Robert Steel, may lead to a face-off with federal regulators and a bidding war with Citigroup Chief Executive Officer Vikram Pandit. The bank may take legal action to block the deal, and a person with knowledge of the deliberations who also said Citigroup may increase its offer..

Buying Wachovia would give Citigroup the third-biggest U.S. bank network and cement its status as the nation's largest lender by assets. A final decision on whether to raise the bid hasn't been made, according to the person, who declined to be identified because the deliberations are private...

Citigroup provided a copy of an exclusivity agreement dated Sept. 29 that says Wachovia won't seek or help new bidders. The document is signed by a Wachovia officer, though the name and title weren't included...

Wells Fargo, whose biggest shareholder is billionaire Warren Buffett's Berkshire Hathaway Inc., may have been helped in its bid by the issuance of an IRS notice Tuesday that makes Wachovia's loan losses more valuable as tax deductions.

``The pronouncement, in effect, allows Wells Fargo to deduct, without limitation, the loan losses and bad debt deductions that Wachovia sustains following the acquisition,'' said Robert Willens, a certified public accountant who analyzes how accounting and tax rules affect Wall Street. That's a change from more stringent limits, he said.

``It's possible that the cost of the deal to Wells will be entirely offset with tax savings resulting from the relaxation of this rule.''

Buffett said in an interview with CNBC that tax law changes had made the deal more attractive. ``Wachovia shareholders will get a lot more money,'' Buffett, 78, said...

``This is a franchise that Wells Fargo wanted and this is one they didn't want to get away,'' said Mark Morgan, senior analyst at Thrivent Financial for Lutherans in Minneapolis. Thrivent held 1.8 million Wells shares as of June 30, according to Bloomberg data. ``This provides an opportunity for Wells Fargo to expand in the eastern U.S., particularly in the Southeast, in markets they've wanted to be in.''

Buying Wachovia detours from the strategy outlined by Wells Fargo Chief Executive Officer John Stumpf, 55, who has said he prefers smaller acquisitions with less risk that would fill gaps in the existing branch network. After the combination, the bank would have $1.42 trillion in assets, which may rank third in the U.S. depending on what other bank mergers are completed. All told, the bank would have $787 billion in deposits and 10,761 branches in 39 states.