[JURIST] The US Federal Reserve Board [official website] Sunday approved [press release] a controversial merger between Wachovia bank and Wells Fargo that had prompted a legal challenge from jilted corporate suitor Citigroup [corporate websites]. Encouraged by the Federal Deposit Insurance Corporation (FDIC) [official website], Citigroup agreed earlier this month to buy out Wachovia for $2.1 billion [press release] but was effectively trumped by a Wells Fargo offer of $11.7 billion. Citigroup subsequently filed a legal challenge to the merger which was only dropped [JURIST report] on Thursday, although a complementary damages suit against both corporations for tortious interference in contract remains on foot. The Federal Trade Commission approved the merger on an expedited basis Friday. The Washington Post has more.

Wachovia is one of several major financial institutions that have failed or sought mergers [JURIST report] amid turmoil in the subprime investment market [academic backgrounder]. Earlier this month, President Bush signed into law [JURIST report] a $700 billion bill intended to stabilize financial markets. The Emergency Economic Stabilization Act of 2008 [PDF text] authorizes the US Treasury to purchase troubled assets from financial institutions and to provide insurance and guarantees for any troubled asset originating before March 14, 2008.