Looks like JPMorgan is not acquiring WaMu, the Feds are taking over and selling it to Morgan. Biggest bank failure in US history.
Government Seizes WaMu and Sells Some Assets
By ERIC DASH and ANDREW ROSS SORKIN
Published: September 25, 2008
New York Times
Washington Mutual, the giant lender that came to symbolize the excesses of the mortgage boom, was seized by federal regulators on Thursday night, in what is by far the largest bank failure in American history.
Regulators simultaneously brokered an emergency sale of virtually all of Washington Mutual — the nation’s largest savings and loan, with $307 billion in assets — to JPMorgan Chase.
The move came as lawmakers reached a stalemate over the passage of a $700 billion bailout fund meant to help ailing banks, and removes one of America’s most troubled banks from the financial landscape while mitigating another potentially huge taxpayer bill for the rescue of another failing institution.
Shareholders and some bondholders will be wiped out. WaMu deposits are guaranteed by the Federal Deposit Insurance Corporation up to the $100,000 per account limit. Customers of Seattle-based WaMu are unlikely to be affected.
JPMorgan Chase — which acquired Bear Stearns only six months ago in another shotgun deal brokered by the government — is to take control Friday of all of WaMu’s 2,300 branches, which stretch from New York to California. The New York-based bank will oversee its big portfolio of mortgage and credit card loans. It will also acquire all of WaMu’s deposits with the sale.
Washington Mutual is by far the biggest bank failure in history, eclipsing the 1984 failure of Continental Illinois National Bank and Trust in Chicago, an event that presaged the savings and loan crisis. IndyMac, which was seized by regulators in July, was a tenth the size of WaMu.
For weeks, the Federal Reserve and the Treasury Department had been nervous about the fate of WaMu, among the worst-hit by the housing crisis, and pressed hard for the bank to sell itself. As panic gripped financial markets last week following the collapse of Lehman Brothers, the government stepped up its efforts, working behind the scenes and at points going behind WaMu’s back to work privately with potential bidders on a deal.
Indeed, the seizure and the deal with JPMorgan came as a shock to Washington Mutual’s board, which was kept completely in the dark: the company’s new chief executive, Alan C. Fishman, was in midair, flying from New York to Seattle at the time the deal was finally brokered, according to these people.
Sheila Bair, the chairwoman of the F.D.I.C., said the government took action Thursday, and not on a Friday as is typical for bank closures, after reports of a deal seeped out, potentially causing depositors to worry.
As with Lehman Brothers, Washington Mutual was less entangled with the rest of the financial system than a behemoth like American International Group, which the government spent $85 billion to take over last week as it faced collapse. On Sunday, the government approved emergency measures to help stabilize Goldman Sachs and Morgan Stanley.
Federal regulators had been trying to broker a deal for Washington Mutual because a takeover by the F.D.I.C. would have dealt a crushing blow to the federal government’s deposit insurance fund. The fund, which stood at $45.2 billion at the end of June, has been severely depleted after suffering a debilitating loss from the sudden collapse of IndyMac Bank. Analysts say that a failure of Washington Mutual would cost the fund upward of $20 billion or $30 billion.
The deal will end WaMu’s 119-year run as an independent company and give JPMorgan Chase branches in California and other markets where it does not have a footprint. But JPMorgan Chase will also inherit a big loan portfolio of troubled mortgages and commercial real estate.
Rest at: nytimes.com |
