Thread: WaMu is seized in largest bank failure in U.S. history

WaMu is seized in largest bank failure in U.S. history

By ERIC DASH and ANDREW ROSS SORKIN, New York Times

Last update: September 25, 2008 - 11:54 PM

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 & Co., for $1.9 billion.

The move removes one of the most troubled U.S. banks from the financial landscape while mitigating another potentially huge taxpayer bill for a rescue.

Customers of Seattle-based WaMu are unlikely to be affected, although shareholders and some bondholders will be wiped out. WaMu account holders are guaranteed by the Federal Deposit Insurance Corp. (FDIC) up to $100,000.

By taking on all of its troubled mortgages and credit loans, JPMorgan will absorb at least $31 billion in losses that would normally have fallen to the FDIC.

JPMorgan Chase -- which acquired Bear Stearns only six months ago in another shotgun deal brokered by the government -- is to take control today of all of WaMu's deposits and bank branches, creating a nationwide retail franchise behemoth that rivals only Bank of America.

But JP Morgan will also take on Washington Mutual's big portfolio of troubled mortgage and credit card loans. The failed bank was only a minor player in the Minnesota mortgage market.

JP Morgan plans to shut down at least 10 percent of the combined company's 5,400 branches in markets. It also plans to raise an additional $8 billion by issuing common stock today to pay for the deal.

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.

"This institution was a big question mark about the health of the deposit fund," Sheila C. Bair, the chairwoman of the FDIC, said of WaMu on Thursday. "It was unique in its size and exposure to higher risk mortgages and the distressed housing market. This is the big one that everybody was worried about."


http://www.startribune.com

AND THE CEO WALKS AWAY WITH 20K....FOR TWO WEEKS OF WORK. GO FIGURE.