Citigroup Inc. agreed Monday morning to acquire the banking operations of Wachovia Corp. for about $2.2 billion in a government-aided merger that pulled the Charlotte, N.C.-based company out of its worsening financial situation.
The intervention occurred after federal officials decided that Wachovia's poor performance threatened to exacerbate the already fragile U.S. economy. Citigroup will inherit up to $42 billion of Wachovia's $312-billion loan portfolio, and the government will absorb the remaining losses in exchange for $12 billion in securities.
The announcement was made just before the U.S. House of Representatives rejected a $700-billion bank bailout that would have helped banks unload bad loans from their balance sheets.
The finance industry's recent turmoil has also carried over to students seeking jobs after graduation. Some said the effects of the sudden acquisition on their future employment have yet to be determined.
"It's really unfortunate for [students] seeking jobs and everyone who's had offers-they don't know if those offers still stand because many of those firms don't exist anymore or exist under different names," said senior Matt Miniat, president of Network for Future Executives. "It's just a really tough, uncertain time."
Seniors Keah Kalantari and Jane Zhao interned at Wachovia over the summer and were both offered full-time positions post-graduation. Following Monday's sale, however, Kalantari and Zhao said they had not been contacted regarding their employment statuses.
"Today was obviously a rough day for me because I really enjoyed my experience and really wanted to go back," Zhao said. "Merrill [Lynch] and Lehman [Brothers] were still able to keep their offers, but Citi is a different corporation and we just don't know what will happen."
Merrill Lynch was sold to Bank of America Sept. 14 and Lehman Brothers filed for bankruptcy soon after. A few days later, Morgan Stanley and Goldman Sachs-the country's two largest investment banks-were reduced to bank holding companies.
Citigroup's acquisition likely rattled Wachovia Corp. Chief Executive Officer and President Robert Steel, Trinity '73 and chair of the Board of Trustees, who left his position as Undersecretary of the Treasury to take the reigns in July before purchasing $16 million worth of Wachovia stock two weeks later.
Still, the change does not come as a surprise to some.
"The thing about this industry is that there's a huge systemic risk of things not working out-that's why people are compensated well in investment banking," Kalantari said. "You have to assume that even if you're given an offer, it's not all set in stone, but that's the case with any finance job right now."
Although Wachovia has actively recruited at Duke in the past, the company has not yet announced the status of its second-round interviews at the University this Saturday.
If the interviews are cancelled, students seeking employment will be pushed back into the weak job market, forcing greater competition for fewer jobs, Miniat said.
Even current employees are at risk of losing their positions at Wachovia, said a Trinity '07 graduate who was one of about 12 Duke graduates to begin work for the bank last year.
"We just don't have any idea," said the alumnus, who asked not to be named. "There's definitely uncertainty throughout the company-whether to wait, whether to act, whether to look for alternative employment-everyone in the company knows it's not a normal period and you just have to roll with it."
Senior Jay Schulhof, president of Duke Investment Club, said that despite the fragile market, strong alumni networks exist at the University that may help lessen the impact of the weak economy on recent graduates.
Though the market appears grim, Zhao said those passionate about finance should still vie for positions in the industry.
"It's still a very interesting time to be in it since you get to see so many changes," she said. "Luckily for us, we're still young, so we're still flexible and have a lot of other options-so I think it's better to deal with this now when we're just starting than later when we have a lot of people depending on us."
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