As part of the deal, Citigroup will absorb up to $42 billion of losses on Wachovia’s $312 billion pool of loans — but the Federal Deposit Insurance Corporation will absorb losses beyond that. In return, the banking giant has given the FDIC $12 billion in preferred stock and warrants as compensation.In a statement, the FDIC, which insures the nation’s retail bank deposits, emphasized that Wachovia did not fail and that the Deposit Insurance Fund would not be affected.

“For Wachovia customers, today’s action will ensure seamless continuity of service from their bank and full protection for all of their deposits,” FDIC Chairman Sheila C. Bair said in a statement. “There will be no interruption in services and bank customers should expect business as usual.”  Link