Citi Buys Wachovia Banking Operations

For months, Wachovia has been dealing with a host of mortgage problems that followed its 2006 acquisition of California residential real estate lender Golden West.

Citi has taken its own massive losses as a result of the housing and credit crisis. The New York based bank was reportedly among the list of suitors considering an acquisition of WaMu.

Standard and Poor's said Monday that it placed Citi's counterparty credit ratings on negative credit watch following the news of the further writedowns. S&P and Moody's Investor Services also placed Wachovia's debt ratings on review.

"The action reflects continued pressures on Citigroup's own performance from writedowns on market-disrupted assets and the loan portfolios," said S&P credit analyst Tanya Azarchs.

Citi's "own market-disrupted assets and mortgage loan exposures pose significant risk," S&P said.

"While there have been questions about the [Citi] model, I hope over the events of the last many weeks and months it's absolutely clear why we continue to think this is the right model and today's transaction, if nothing, strengthens that model significantly for us as a company," Pandit said.

"I want to assure you that while we are working on this transaction ... nothing is going to take our eye off the ball in getting fit," he said. "We're committed to the same things we talked about" in terms of expense reduction, business repositioning and asset reduction.

"That plan continues in full force," he said.

Both stocks fell amid a market-wide selloff following the House's rejection of the $700 billion financial bailout plan. Wachovia shares were plummeting 81% to $1.90 in recent trading. Citi shares were up 5.3% to $19.08.