If banks do not have money to lend, how can they buy up finance firms and other failing banks?

BY busadmin  October 9, 2008 at 12:01 PM EST

Wells Fargo; File photo

Question/Comment: If banks do not have money to lend, how can Citicorp, Wells Fargo, etc. come up with billions to purchase failing banks and finance firms?

Paul Solman: They aren’t forking over any cash. “Purchase” means subsume. Wachovia becomes part of Wells Fargo. The “price” is what Wachovia stockholders get in Wells Fargo stock.

Wells Fargo, meanwhile, announced it would raise up to $20 billion dollars from investors by issuing new stock of its own. If and when that happens, the net effect would be that Wells Fargo will have more money to lend.