INSTANT VIEW: Citi to buy Wachovia operations with govt help

NEW YORK (Reuters) - The Federal Deposit Insurance Corp on Monday said that Citigroup was buying the operations of Wachovia Corp in a deal that would see the government backstop any losses beyond $42 billion on the bank's $312 billion pool of loans.

Wachovia shares plunged 90 percent in premarket trading, while Citi shares fell 5.4 percent after additionally gaining more than 3 percent.

The following is reaction from industry analysts and investors:

MATT MCCORMICK, PORTFOLIO MANAGER AND BANKING ANALYST AT BAHL & GAYNOR IN CINCINNATI

"It just seems that there are only going to be two types of banks in existence now: the ones that survive and get market share or the ones that get gobbled up and have to be euthanized."

"Wachovia overreached is the only exit strategy that the market would allow them."

"I think what (Citigroup) is looking at is a great opportunity to buy some crown jewels...they feel there's some value...It's going to be interesting to see how they make it work."

THIERRY LACRAZ, STRATEGIST AT SWISS BANK PICTET, GENEVA

"We live in extraordinary times -- it's become very normal for a big bank to disappear quickly. It's positive that Citi is buying Wachovia because that diminishes risk.

Now people are focusing on the U.S. plan, which goes in the right direction and should diminish tension on short-term interbank lending but may not necessarily be good at a micro level for the banks.

DAVID BUIK, STRATEGIST AT CANTOR INDEX, LONDON

"This cannot be allowed to go on like this. This is hopeless. They are going to dump this stuff into the pot soon. They need to be taking this stuff off the street sooner rather than later. The trouble is toxic."

CRAIG PECKHAM, EQUITY TRADING STRATEGIST AT JEFFERIES & COMPANY IN NEW YORK

"I think that the bottom line here is that the acquisition of Wachovia doesn't take anyone by surprise -- the consideration to shareholders as measly as it is takes people by surprise and really acts as yet another warning about how quickly asset values and liquidity are deteriorating.

While Wachovia may not have been technically a failure the deal is certainly being managed as though it was an institution on the brink and that is born in the kind of value that Wachovia shareholders are recovering from this deal.

The irony is that while in the last 72 hours a lot of progress was being made in Washington on this intervention in the credit markets, we still saw money market conditions worsen considerably to all-time adverse extremes. It really tells you the market is not buying into this as any kind of panacea."