In what is by far the largest bank failure in U.S. history, federal regulators have seized Washington Mutual Inc. and struck a deal to sell the bulk of its operations to J.P. Morgan Chase & Co. The closing represents the demise of what once was the largest U.S. thrift but came to symbolize many of the worst excesses of the mortgage boom. Federal regulators said WaMu has suffered an exodus of $16.7 billion in deposits since Sept. 15, leaving the Seattle thrift “with insufficient liquidity to meet its obligations.” As a result, WaMu was in “an unsafe and unsound condition to transact business,” according to the Office of Thrift Supervision.
THE FOLLOWING IS A STATEMENT ISSUED BY THE FDIC:
JPMorgan Chase acquired the banking operations of Washington Mutual Bank in a transaction facilitated by the Federal Deposit Insurance Corporation. All depositors are fully protected and there will be no cost to the Deposit Insurance Fund.
“For all depositors and other customers of Washington Mutual Bank, this is simply a combination of two banks,” said FDIC Chairman Sheila C. Bair. “For bank customers, it will be a seamless transition. There will be no interruption in services and bank customers should expect business as usual come Friday morning.”
JPMorgan Chase acquired the assets, assumed the qualified financial contracts and made a payment of $1.9 billion. Claims by equity, subordinated and senior debt holders were not acquired.
“WaMu’s balance sheet and the payment paid by JPMorgan Chase allowed a transaction in which neither the uninsured depositors nor the insurance fund absorbed any losses,” Bair said.
Washington Mutual Bank also has a subsidiary, Washington Mutual FSB, Park City, Utah. They have combined assets of $307 billion and total deposits of $188 billion.
THE FOLLOWING IS A STATEMENT ISSUED BY OFFICE OF THRIFT SUPERVISION:
Washington Mutual Bank, the $307 billion thrift institution headquartered in Seattle, was acquired today by JPMorgan Chase, the Office of Thrift Supervision (OTS) announced.
The change will have no impact on the bank’s depositors or other customers. Business will proceed uninterrupted and bank branches will open on Friday morning as usual.
Washington Mutual, or WaMu, specialized in providing home mortgages, credit cards and other retail lending products and services. WaMu became an OTS-regulated institution on December 27, 1988 and grew through acquisitions between 1996 and 2002 to become the largest savings association supervised by the agency. As of June 30, 2008, WaMu had more than 43,000 employees, more than 2,200 branch offices in 15 states and $188.3 billion in deposits.
“The housing market downturn had a significant impact on the performance of WaMu’s mortgage portfolio and led to three straight quarters of losses totaling $6.1 billion,” noted OTS Director John Reich.
Pressure on WaMu intensified in the last three months as market conditions worsened. An outflow of deposits began on September 15, 2008, totaling $16.7 billion. With insufficient liquidity to meet its obligations, WaMu was in an unsafe and unsound condition to transact business. The OTS closed the institution and appointed the Federal Deposit Insurance Corporation (FDIC) as receiver. The FDIC held the bidding process that resulted in the acquisition by JPMorgan Chase.
(Forshay – YWN Business)
Join the official YWN WhatsApp status
8 Responses
This will get a LOT worse before it gets better. I wonder how the Yom Tov fundraisers have been doing?
Pareve cholent for a while, anyone?
Parve cholent is very healthy!
i’m running a mosad in eretz yisrael, and am feeling it very hard. maybe I could also get the feds to take over my debt.
MOSHIACH IS COMING.
america is crumbling in front of our very eyes r”l
If, for whatever reason, 9/11 (or day-to-day life) didn’t show how Hashem is Melech and Norah, perhaps this whole astonishing fiasco of major (long-established and old-money) banks and the general horror of the American economy, does.
Noone is taking over any debt. This is a really sweet deal, and there’s no chance of anyone catching the same:
1. The FDIC seized conrtol of WaMu, and decided to sell it to JP Morgan for a paltry $1.9 Billion. Since it cost them nothing to acquire it, I guess the sale price wasn’t much of an issue.
2. JP Morgan gets all the WaMu deposits, mortgages, branches.
3. JP Morgan gets NONE of the debt obligations (bond holders will receive no future payments).
4. Preferred Shareholders and bondholders of WaMu can wait until the assets are divvied up (though there won’t be any as JP Morgan bought them all) and common shareholders get nothing.
I’d love to do this to myself – seize my property and sell off my assets to my wife. I take the cash from the sale, my wife gets the house, the bank accounts, my salary, the shares of stock I own while my mortgage holder, my credit cards and my other creditors get nothing further. Of course, my wife and I would then share the proceeds of the deal from both sides and I could retire young.
Unfortunately, halacha considers this theft. Even the old US of A has now made this option unavailable to bankruptcy filers (though the deal was never this sweet even before bankruptcy law was changed).