Wells-Wachovia: That’s $270 billion less we’re on the hook for

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In a fascinating turn of events that we’ll surely all learn more about over the course of the next few days, Wells Fargo–which had been about to buy Wachovia a week ago and then backed down, forcing the FDIC to bankroll a shotgun acquisition by Citigroup–changed its mind and agreed to pay $15 billion for the giant bank.

This time the FDIC isn’t part of the deal. So that $312 billion Wachovia loan portfolio that the FDIC agreed to share losses on with Citi (Citi agreed to take the first $42 billion) is now completely Wells Fargo’s responsibility. Although of course we taxpayers are all on the hook for Wells Fargo’s losses in the same way we’re on the hook for any bank’s.

The encouraging part here is that instead of a combination of two ailing banks engineered by a government agency we get an outright takeover by one of the healthiest big banks in the country. A big bank whose biggest shareholder is Warren Buffett (who bought in during the country’s last banking crisis, in 1990). And a bank whose chairman, Dick Kovacevich, is widely thought of as the smartest guy in the banking business.

The deal would leave a competitive landscape with three giant national retail banks–JP Morgan Chase, Bank of America, and Wells Fargo–leaving Citigroup as a sort of odd man out, with big global and investment operations but not nearly the domestic branch network of the Big Three. Oh, and it leaves Kovacevich, who left Citi in 1985 after losing out on a promotion, thoroughly vindicated.

For now at least. The one thing about the Wells-Wachovia deal that worries me is that it creates an entity awfully exposed to California real estate (it was Wachovia’s acquisition of California thrift Golden West–a.k.a. World Savings–that got it into trouble in the first place).

Oh, and one thing about the new Big Three that I find interesting: Their names are all brands they picked up along the way from banks they acquired. If I’ve got it right, they’re really Chemical, Nationsbank and Norwest.

Update: Charlie Gasparino is reporting on CNBC that Citi is very ticked about this. Will it try to block the deal? We’ll see.

Update 2: The WSJ reports that Citi may sue, or may make a new bid. A bidding war! In the middle of a financial meltdown! That’s pretty cool.