Wall Street Sells Off Despite Bailout Approval

As investors awaited legislative aid in the morning, Wachovia (WB Quote) announced it has agreed to be sold to Wells Fargo (WFC Quote) in a $15.1 billion deal that Wells Fargo says will not require assistance from the Federal Deposit Insurance Corp. or any other government agency. The deal appears to negate another deal brokered by the FDIC Monday under which Citigroup (C Quote) agreed to acquire all of the banking subsidiaries of Wachovia. Citi is threatening legal action to stop the Wells Fargo deal and keep its own merger deal with Wachovia in place.

"Now you see a deal that's being done without being forced," said Richard Sparks, senior equities analyst at Schaeffer's Investment Research. He said that it's a positive for the market to see a bank merger based on valuation rather than the impulse on the part of the government to save a failing company.

Wells Fargo finished the day down 1.7% at $34.56, Citi dropped 18% to $18.35, and Wachovia skyrocketed 59% to $6.21.

Not all news from the financial sector was as rosy. Swiss bank UBS (UBS Quote) said it would cut 2,000 jobs as part of its reorganization efforts. Shares lost 0.8% to $19.95.

Insurance firm AIG (AIG Quote) said it would sell several of its business segments in an effort to pay back an $85 billion loan from the government. The stock dropped 3.5% to $3.86.

The Wall Street Journal reported that Washington Mutual CEO Alan Fishman won't stay on at JPMorgan Chase (JPM Quote), which acquired WaMu after it failed on Sept. 25. JPMorgan shares dropped 7.9% to $45.90.