The Citi Exclusivity Agreement

Here is the exclusivity agreement upon which Citigroup is placing so many of its hopes; it was signed by executives from both Citi and Wachovia. If it holds up in court, Citi might just be able to walk away with Wachovia. But I think that Citi's best hope of derailing the Wells Fargo-Wachovia deal would be if Citi can persuade the regulators not to approve it. After all, as of right now, the Citi-Wachovia deal has regulatory approval; the Wells Fargo deal doesn't.

Citi will also attempt to fight a public-relations war related to executive compensation: because Wells Fargo is buying all of Wachovia, rather than just the banking operations, it's going to trigger the change-of-control provisions in Wachovia's employment agreements. That could, in turn, mean $250 million going to Wachovia's senoir management, at a time when politicians on both sides of the aisle are railing against exactly those kind of pay packets.

The exclusivity agreement does say what Citi says it says; the question, of course, is how enforceable it is. If it is enforceable, Wachovia might be forced to go through with the Citi deal. But the history of the credit crunch so far would seem to indicate that agreements on paper aren't worth very much. And with Citi's stock down 14% today even with the TARP going through, the market would seem to agree.