They are talking about Wachovia

Wachovia executives started noticing customers withdrawing money on Friday morning, following the failure of Washington Mutual on Thursday.

“The so-called silent run on the bank - it’s real,” Carlos Evans, Wachovia’s wholesale banking executive, said in an interview.

Money flowed out of Wachovia throughout the weekend, people moving their money until things settled down. There’s no question the company was weakened.

Starting Friday morning, Evans said, businesses and institutions with large accounts started withdrawing money to lower their balances below the federally insured $100,000 limit.

When Wachovia opened Monday it would not have had a source of liquidity,” a source familiar with the situation said. “It really could not have opened under those circumstances. That’s why (the FDIC) put together the assistance package.”

In the resulting agreement, Citigroup agreed to buy Wachovia’s banking operations and most of its assets, with assistance from the FDIC. The agency will pick up losses above $42 billion on a $312 billion loan book in exchange for $12 billion in Citi securities.

Wachovia prefers the Wells Fargo deal, as it is a much higher valuation than the Citigroup deal, and it keeps the banking and brokerage businesses together.

Citigroup is exploring their legal options, demanding that Wachovia and Wells Fargo cease discussions, citing an exclusivity agreement between Citigroup and Wachovia. Wachovia and Wells Fargo argue that the Citigroup agreement was never binding, and that the Wells Fargo deal is better for Wachovia.

Citigroup has already taken measures to stop the Wells Fargo-Wachovia merger, claiming that Wells Fargo has engaged in “tortious interference” with an exclusivity agreement between Citigroup and Wachovia.

Wells Fargo announced it had agreed to acquire Wachovia for $15.1 billion in stock. As business halted for the weekend, Wachovia was already in talks with Citigroup and Wells Fargo. Wells Fargo will pay $15.1 billion–roughly $7 per share–to buy Wachovia.

Wells Fargo initially emerged as the frontrunner to acquire the ailing Wachovia’s banking operations, but backed out due to concerns over Wachovia’s commercial loans. By this time, regulators were concerned that Wachovia wouldn’t have enough short-term funding to open for business on September 29.