Paulson: Wachovia could have posed systemic risk

WASHINGTON (Reuters) - U.S. Treasury Secretary Henry Paulson said on Monday that a failure of Wachovia Corp would have posed a "systemic risk" to the financial system, commending the Federal Deposit Insurance Corp for brokering a sale of the bank to Citigroup.

"I agree with the FDIC and the Federal Reserve that a failure of Wachovia would have posed a system risk," Paulson said in a statement.

He said all Wachovia depositors would be protected under the action, and Wachovia's senior and subordinated debt would be assumed by Citigroup.

"In this period of market stress, we are committed to taking all actions necessary to protect our financial system and our economy," Paulson said.

(Reporting by David Lawder and Tim Ahmann)