Free Market: Down, but Not Out

Contrary to what the power-mad bureaucrats in Washington would have you believe, the free market works. It was not malfunctioning. The economic downturn was simply the market's way of correcting years of government interfenece and manipulation.

Thankfully, some businesses are choosing not to rely on the feds. From the Wall Street Journal:

Citigroup Inc.'s takeover of Wachovia Corp. was torpedoed on Friday when San Francisco-based Wells Fargo & Co. agreed to pay $15.4 billion to buy Wachovia.

Wells Fargo's offer upended the government's hastily arranged effort last weekend to match New York-based Citigroup with Wachovia of Charlotte, N.C. -- a federal effort to prevent the bank from joining the growing ranks of failed financial institutions.

Wells Fargo's deal on Friday marked a stunning turn of fortunes for Wachovia, the nation's fourth-largest bank in market value as recently as last year. Wells Fargo had been among the leading suitors for Wachovia during a tense period of negotiations last weekend that ended, in the wee hours Monday morning, with a government deal to sell most of Wachovia to Citigroup.

The Citigroup deal, which included a provision for the government to possibly absorb hundreds of billions of dollars in future Wachovia losses, was warmly received by Citigroup shareholders but nearly wiped out Wachovia's. Now, in forcing Wachovia back into play, Wells Fargo sets the stage for one of the most dramatic takeover battles in recent memory, pitting against each other the No. 3 and No. 4 U.S. banks in terms of stock-market value.

The Wells Fargo offer provides a glimmer of support for the fundamental value of troubled U.S. banks: It signals that there is still a market, albeit limited, for private takeovers of these institutions, one that does not place taxpayer dollars at risk. It is also significant because the new buyer, unlike Citigroup, asks for no government assistance.

This deal will probably be challenged in court. Americans believing that they make it without government assistance poses a threat to the political establishment. But it is rather encouraging to see that a few people still believe in free enterprise.