View Full Version : Washington Mutual Seized by FDIC

25th September 2008, 21:36
Washington Mutual which is the largest savings and loan in the US was seized by regulators late Thursday.

JPMorgan Buys WaMu's Deposits as Thrift Is Seized by Regulators

They had a lot of credit derivative contracts that have evolved into an event due to the seizure just like Lehman Brothers. I think silver will take to the upside soon as this rocks the markets.

To add insult to injury, a New York Times article stated that the new WAMU CEO Alan H. Fishman who has been on the job for less than three weeks, is eligible for $11.6 million in cash severance and will get to keep his $7.5 million signing bonus in this deal brokered by the FDIC.

25th September 2008, 22:35
Wrote a check today to clear out my account... hope it went through!

25th September 2008, 23:19
Damn Sam! I've still got a few hundred in my WaMu account, though I'd transfered the bulk of what I had over to another bank.

Gads, I've never been through a bank closure before. What is the proceedure? Will my debit card still work? Can I take my money out that way?

I know that I'll get back what little I still have in that account since it is FDIC insured, but still, I don't have a clue how to go about it.

I guess this will be a learning experience, huh?

By the way folks, if a bank is going to go down, I'm glad the bank I've used for years went down now. And the reason why is because FDIC does NOT have enough money to even begin to cover all the banks on their "watch list."

25th September 2008, 23:52
JPMorgan Chase buys WaMu assets after FDIC seizure


NEW YORK - JPMorgan Chase & Co. Inc. came to the rescue of Washington Mutual Inc. Thursday, buying the thrift's banking assets after WaMu was seized by the Federal Deposit Insurance Corp. in the largest failure ever of a U.S. bank. This is the second time in six months that JPMorgan Chase has taken over a major financial institution crippled by bad bets in the mortgage market.

The deal will cost JPMorgan Chase $1.9 billion, and the bank said in a statement it planned to write down WaMu's loan portfolio by approximately $31 billion. JPMorgan Chase, which acquired Bear Stearns Cos. last March, also said it would sell $8 billion in common stock to raise its capital position.

The FDIC, which insures bank deposits, said it would not have to dip into the insurance fund as a result of the seizure. There had been concerns that the fund, which took a big hit after the seizure of IndyMac Bank, could be depleted by a WaMu seizure.

WaMu "was under severe liquidity pressure," FDIC Chairman Sheila Bair told reporters in a conference call.

"For all depositors and other customers of Washington Mutual Bank, this is simply a combination of two banks," Bair said in a statement. "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."

The government measures bank failures by an institutions's assets; Seattle-based WaMu has roughly $310 billion in assets. The previous record was the failure of Continental Illinois National Bank in 1984, with $40 billion in assets when it closed. IndyMac, seized in July, had $32 billion.

WaMu was searching for a lifeline after piling up billions of dollars in losses due to failed mortgages. WaMu has seen its stock price plummet by 87 percent this year, and it suffered a ratings downgrade by Standard & Poor's earlier this week that put it in danger of collapse.

The Bush administration's proposal for a $700 billion bailout for distressed financial institutions was believed to have given fresh impetus to a buyout and new allure to WaMu. However, it was not immediately known how the bailout, which was still being negotiated in Washington late Thursday, would affect the JPMorgan Chase-WaMu deal.

JPMorgan Chase's chief executive, Jamie Dimon, said in a conference call, said the "only negative" related to the deal was "how to handle some of these bad assets." He did not elaborate.

Besides JPMorgan Chase, Wells Fargo & Co., Citigroup Inc., HSBC, Spain's Banco Santander and Toronto-Dominion Bank of Canada were all mentioned as possible suitors. WaMu was also believed to be talking to private equity firms.

The FDIC was seeking a buyer will to bear a large burden of WaMu's losses to lessen the impact on the insurance fund.

In a statement, JPMorgan Chase said it was not acquiring any senior unsecured debt, subordinated debt, and preferred stock of Washington Mutual's banks, or any assets or liabilities of the holding company, Washington Mutual Inc.

JPMorgan Chase said the acquisition will give it 5,400 branches in 23 states. JPMorgan Chase said it plans to close less than 10 percent of the two companies' branches; the bank has not yet decided which to close.

In March, the bank acquired the failing Bear Stearns in a deal brokered by the government. It paid $2.3 billion for the company and its stock, bringing its expenditure on both Bear Stearns and WaMu to a total of $4.2 billion.

Washington Mutual ran into trouble after it got caught up in the booming part of the mortgage business that made loans to people with bad credit, known as subprime borrowers.

Troubles spread to other parts of WaMu's home loan portfolio, namely its "option" adjustable-rate mortgage loans. Option ARM loans offer very low introductory payments and let borrowers defer some interest payments until later years. The bank stopped originating those loans in June.

Problems in WaMu's home loan business began to surface in 2006, when the bank reported that the division lost $48 million, compared with net income of about $1 billion in 2005.

At the start of 2007, following the release of the company's annual financial report, then-CEO Kerry Killinger said the bank had prepared for a slowdown in its housing business by sharply reducing its subprime mortgage lending and servicing of loans. Killinger was replaced as CEO on Sept. 8 by Alan H. Fishman, the former president and chief operating officer of Sovereign Bank and president and CEO of Independence Community Bank.

As more borrowers became delinquent on their mortgages, WaMu worked to help troubled customers refinance their loans as a way to avoid default and foreclosure, committing $2 billion to the effort last April. But that proved to be too little, too late.

At the same time, fears of growing credit problems kept investors from purchasing debt backed by those loans, drying up a source of cash flow for banks that made subprime loans.

In December, WaMu said it would shutter its subprime lending business and reduce expenses with layoffs and a dividend cut.

WaMu became one of the first retail banks to seek outside cash in the wake of the credit crisis when it agreed to sell equity securities to an investment fund managed by TPG Capital and to other investors this spring, raising $7.2 billion in fresh capital.

The bank in July reported a $3 billion second-quarter loss _ the biggest in its history _ as it boosted its reserves to more than $8 billion to cover losses on bad loans.

JPMorgan Chase said the WaMu acquisition would add 50 cents per share to its earnings in 2009, and said it expects to have pretax merger costs of approximately $1.5 billion while achieving pretax savings of approximately $1.5 billion by 2010.

Before Thursday's announcement, there were concerns that the FDIC would have to turn to taxpayers to build up its fund, which has dipped from $52.4 billion at the end of last year to $45.2 billion, mostly because of the costs of IndyMac's failure.

Next month, Bair plans to propose increasing the premiums paid by banks and thrifts to replenish the fund. That plan is likely to be approved by the FDIC board. It is scheduled to be presented at a board meeting on Oct. 7, FDIC spokesman Andrew Gray said Thursday.

Copyright 2008 The Associated Press.

26th September 2008, 00:25
I see how it works. Let the market drive down the price, buy it at a discount, have the American people pick up the mistakes, and you're left with 5400 branches right after you conveniently change your status from an investment bank to a bank holding company. And you get the Fed to lift the 30 day wait and broker the deal. Hard to believe they can pull this bullshit before the bailout (screwing) is even complete. I have officially lost faith. They can come up with capital to buy the competition, but we have to buy the non-profitable mistakes.


26th September 2008, 00:33
Yep. It's the big one eating the little ones. JP Morgan-Chase, owned by the Rockefellers, Morgans and Rothchilds, the very Fed families I could not despise more!

There is not a chance in hell I will do business with them.

I'm telling you flat out, JP Morgan-Chase is the second largest owner of the Federal Reserve Bank. This whole mess was in part engineered to wipe out their competition.

And the pricks just took down one of the best thrift banks around.

WaMu was a good bank.

26th September 2008, 01:20
Just thinking out loud there. Why not way over draw your checking account and see if they ever come looking???@ In mean time call and say you card was lost. I mean, who going to give a rats ass about a few 100 buck with all the poop covered employees??

As anyone but me noticed that my bad imp sitting on my my right shoulder as been winning more conversations over the good imp sitting on my left sholder?!?!

26th September 2008, 01:41
My personal opinion says that now is not the time to do anything flagrantly wrong with financial institutions. While I would love nothing more than to see these folks fry like bacon, I would not justify getting putting yourself in ANY type of financial risk beyond what we're already in. I don't even think this financial crisis has gotten out of the blocks. I think the bell's just gone off and the gates are opening. It's going to be a long race, so don't put yourself on any radars you don't have to.

26th September 2008, 06:56
Sage advice, Balou.

26th September 2008, 13:31
Having worked for a bank that's taken over other banks and is NOW considered the largest American bank (I can't BELIEVE BOFA is now considered the US' big safe bank...) I can tell you if you didn't have a mortgage, large auto loan, business loan, or credit card debt repayment deal with them, then you shouldn't have any problem with the JPMorgan take over with WaMu.

JP Morgan; the biggest shorter of futures trades yes? They could take down the price of another bank's stock AND get themselves on the No Short list so nobody else could short THEIR stock... By buying WaMu the way they did, they can avoid any investigation into their assets. Having a bank account is about having a way to push paper promises. I wouldn't have expected WaMu to get me out of financial hot water any more than I'd be expecting help from the government! WaMu had a better debit card anti-ID theft security system than JP Morgan! It's better than BOFAs. NOW JP Morgan bought that system and some other proprietary software originally owned by WaMu to facilitate its' ability to administer to this sale. By the way, WaMu's employees used to be able to buy their stock direct for their retirement savings! JP Morgan is going to issue new stock with this purchase. Yeah, we know it's worth less than when it was WaMu, but those working for the bank will be able to get their shares bought out, and get the new JP Morgan ones.

Look at what's going on with Barclay's purchase of Lehman's. They put up the new signage at the Lehman headquarters, but who ever's working there - job's same as last year, or last month... I don't think there's time for the old style of 'take over and change' these days. Anyway. I've had my accounts with WaMu since 2000, BOFA had to send my auto-paycheck to them the whole time I was working for them.

Vincent Vega
26th September 2008, 13:43
JPM got a hell of a deal - they paid $2 bil for maybe $50-60 bil of assets. That's akin to me buying a Benz for two grand - I'd be a fool not to.

26th September 2008, 14:11
Hi Guys

I'm new to this forum, but have been invested in gold, silver and uranium since 2002. I got stopped out of many of my shares over the past year, and recently started buying again . I bought SLV at $12.00 and am now thinking of re-buying many of the stocks that I got stopped out of - Silver Standard, Fortuna, CDE to name a few.

I read David Morgan and The Trend Letter and have doen well by their advise, but am interested in what the actual investors are doing.


26th September 2008, 17:56
Hi Guys

I'm new to this forum, but have been invested in gold, silver and uranium since 2002. I got stopped out of many of my shares over the past year, and recently started buying again . I bought SLV at $12.00 and am now thinking of re-buying many of the stocks that I got stopped out of - Silver Standard, Fortuna, CDE to name a few.

I read David Morgan and The Trend Letter and have doen well by their advise, but am interested in what the actual investors are doing.


Welcome to the forum, don. Many of us here, myself included, are bullion buy and hold. Since it doesn't take much maintenance to own a peice of metal, it gives us enough time to wax and rant on issues we feel matter.

Feel free to weigh in, though, even though you entry and exit points to SLV and Fortuna might keep you a bit occupied.