My bank failed.

[Captain Chaos]

WaMu is largest U.S. bank failure

By Elinor Comlay and Jonathan Stempel 1 hour, 13 minutes ago

NEW YORK/WASHINGTON (Reuters) - Washington Mutual Inc was closed by the U.S. government in by far the largest failure of a U.S. bank, and its banking assets were sold to JPMorgan Chase & Co for $1.9 billion.
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Thursday's seizure and sale is the latest historic step in U.S. government attempts to clean up a banking industry littered with toxic mortgage debt. Negotiations over a $700 billion bailout of the entire financial system stalled in Washington on Thursday.

Washington Mutual, the largest U.S. savings and loan, has been one of the lenders hardest hit by the nation's housing bust and credit crisis, and had already suffered from soaring mortgage losses.

Washington Mutual was shut by the federal Office of Thrift Supervision, and the Federal Deposit Insurance Corp was named receiver. This followed $16.7 billion of deposit outflows at the Seattle-based thrift since Sept 15, the OTS said.

"With insufficient liquidity to meet its obligations, WaMu was in an unsafe and unsound condition to transact business," the OTS said.

Customers should expect business as usual on Friday, and all depositors are fully protected, the FDIC said.

FDIC Chairman Sheila Bair said the bailout happened on Thursday night because of media leaks, and to calm customers. Usually, the FDIC takes control of failed institutions on Friday nights, giving it the weekend to go through the books and enable them to reopen smoothly the following Monday.

Washington Mutual has about $307 billion of assets and $188 billion of deposits, regulators said. The largest previous U.S. banking failure was Continental Illinois National Bank & Trust, which had $40 billion of assets when it collapsed in 1984.

JPMorgan said the transaction means it will now have 5,410 branches in 23 U.S. states from coast to coast, as well as the largest U.S. credit card business.

It vaults JPMorgan past Bank of America Corp to become the nation's second-largest bank, with $2.04 trillion of assets, just behind Citigroup Inc. Bank of America will go to No. 1 once it completes its planned purchase of Merrill Lynch & Co.

The bailout also fulfills JPMorgan Chief Executive Jamie Dimon's long-held goal of becoming a retail bank force in the western United States. It comes four months after JPMorgan acquired the failing investment bank Bear Stearns Cos at a fire-sale price through a government-financed transaction.

On a conference call, Dimon said the "risk here obviously is the asset values."

He added: "That's what created this opportunity."

JPMorgan expects to incur $1.5 billion of pre-tax costs, but realize an equal amount of annual savings, mostly by the end of 2010. It expects the transaction to add to earnings immediately, and increase earnings 70 cents per share by 2011.

It also plans to sell $8 billion of stock, and take a $31 billion write-down for the loans it bought, representing estimated future credit losses.

The FDIC said the acquisition does not cover claims of Washington Mutual equity, senior debt and subordinated debt holders. It also said the transaction will not affect its roughly $45.2 billion deposit insurance fund.

"Jamie Dimon is clearly feeling that he has an opportunity to grab market share, and get it at fire-sale prices," said Matt McCormick, a portfolio manager at Bahl & Gaynor Investment Counsel in Cincinnati. "He's becoming an acquisition machine."

BAILOUT UNCERTAINTY

The transaction came as Washington wrangles over the fate of a $700 billion bailout of the financial services industry, which has been battered by mortgage defaults and tight credit conditions, and evaporating investor confidence.

"It removes an uncertainty from the market," said Shane Oliver, head of investment strategy at AMP Capital in Sydney. "The problem is that markets are in a jittery stage. Washington Mutual provides another reminder how tenuous things are."

Washington Mutual's collapse is the latest of a series of takeovers and outright failures that have transformed the American financial landscape and wiped out hundreds of billions of dollars of shareholder wealth.

These include the disappearance of Bear, government takeovers of mortgage companies Fannie Mae and Freddie Mac and the insurer American International Group Inc, the bankruptcy of Lehman Brothers Holdings Inc, and Bank of America's purchase of Merrill.

JPMorgan, based in New York, ended June with $1.78 trillion of assets, $722.9 billion of deposits and 3,157 branches. Washington Mutual then had 2,239 branches and 43,198 employees. It is unclear how many people will lose their jobs.

Shares of Washington Mutual plunged $1.24 to 45 cents in after-hours trading after news of a JPMorgan transaction surfaced. JPMorgan shares rose $1.04 to $44.50 after hours, but before the stock offering was announced.

119-YEAR HISTORY

The transaction ends exactly 119 years of independence for Washington Mutual, whose predecessor was incorporated on September 25, 1889, "to offer its stockholders a safe and profitable vehicle for investing and lending," according to the thrift's website. This helped Seattle residents rebuild after a fire torched the city's downtown.

It also follows more than a week of sale talks in which Washington Mutual attracted interest from several suitors.

These included Banco Santander SA, Citigroup Inc, HSBC Holdings Plc, Toronto-Dominion Bank and Wells Fargo & Co, as well as private equity firms Blackstone Group LP and Carlyle Group, people familiar with the situation said.

Less than three weeks ago, Washington Mutual ousted Chief Executive Kerry Killinger, who drove the thrift's growth as well as its expansion in subprime and other risky mortgages. It replaced him with Alan Fishman, the former chief executive of Brooklyn, New York's Independence Community Bank Corp.

WaMu's board was surprised at the seizure, and had been working on alternatives, people familiar with the matter said.

More than half of Washington Mutual's roughly $227 billion book of real estate loans was in home equity loans, and in adjustable-rate mortgages and subprime mortgages that are now considered risky.

The transaction wipes out a $1.35 billion investment by David Bonderman's private equity firm TPG Inc, the lead investor in a $7 billion capital raising by the thrift in April.

A TPG spokesman said the firm is "dissatisfied with the loss," but that the investment "represented a very small portion of our assets."

DIMON POUNCES

The deal is the latest ambitious move by Dimon.

Once a golden child at Citigroup before his mentor Sanford "Sandy" Weill engineered his ouster in 1998, Dimon has carved for himself something of a role as a Wall Street savior.

Dimon joined JPMorgan in 2004 after selling his Bank One Corp to the bank for $56.9 billion, and became chief executive at the end of 2005.

Some historians see parallels between him and the legendary financier John Pierpont Morgan, who ran J.P. Morgan & Co and was credited with intervening to end a banking panic in 1907.

JPMorgan has suffered less than many rivals from the credit crisis, but has been hurt. It said on Thursday it has already taken $3 billion to $3.5 billion of write-downs this quarter on mortgages and leveraged loans.

Washington Mutual has a major presence in California and Florida, two of the states hardest hit by the housing crisis. It also has a big presence in the New York City area. The thrift lost $6.3 billion in the nine months ended June 30.

"It is surprising that it has hung on for as long as it has," said Nancy Bush, an analyst at NAB Research LLC.

(Additional reporting by Paritosh Bansal, Christian Plumb and Dan Wilchins; Jessica Hall in Philadelphia; John Poirier in Washington, D.C. and Kevin Lim in Singapore; Editing by Gary Hill and Carol Bishopric)

[Armueller2001]

So what does that mean for you?

I'm thinking about buying a whole crapload of gold... since our currency is meaningless paper that gets devalued every day.

[Captain Chaos]

I'll have to talk this with my dad as we both have money in there. We have been reading about this for 2 weeks and we don't want to lose any money.

[GeneralElectric]

Originally Posted by Captain Chaos

I'll have to talk this with my dad as we both have money in there. We have been reading about this for 2 weeks and we don't want to lose any money.

You won't if its in an account.
FDIC beetches!

[EricF]

Originally Posted by GeneralElectric

You won't if its in an account.
FDIC beetches!

*DING* Right answer!

[Armueller2001]

Originally Posted by GeneralElectric

You won't if its in an account.
FDIC beetches!

Where does that money come from? "The Man"?

[GeneralElectric]

Originally Posted by Armueller2001

Where does that money come from? "The Man"?

Pretty much

[MJ5150]

My bank too. I have had an account with them since 1980. So sad to see them go. As soon as the bad news started hitting the news in recent weeks, paranoid account holders were withdrawing their money like crazy everyday. One of my co-workers took her $800 or so out and chastised me for leaving my money in my account. I think this mass hysteria up here contributed to the downfall...at least it expedited it.

I'm not a fan of JP Morgan, so once I find a small local credit union or bank, I'll move my accounts over to it. But yes, I am deeply saddened today.

-Mike

[crimson_basser]

its crazy (and scary) to think that the one thing our entire life is based around has absolutely no value and is completely meaningless.

honestly...

[mattq]

Originally Posted by crimson_basser

its crazy (and scary) to think that the one thing our entire life is based around has absolutely no value and is completely meaningless.

honestly...

it's kind of weird. the only reason it had value to begin with is because we as a nation decided to agree it had a specific value. and by extension, i guess it means all the trouble we're in is because we all agreed that it's worth less now

[Jazz Ad]

What protects depositors in these cases ?
Just curious.

[Asa Samuel]

Is this the right time to post a FAIL pic?

[BurningSkies]

Yeah, I'm not so happy about my bank doing the buyout on this one either...


But fer'real if you've just got your money in deposit (savings/checking) you should be all set up to 100,000.00. If you have more than that, it's a potential for some badness. The FDIC insures up to that amount. If you've got some investments happening, it could be rough.

[Visirale]

Originally Posted by GeneralElectric

You won't if its in an account.
FDIC beetches!

It's only good for 100 grand...

[WRBass]

I don't think anything significant changes for you. Later, they will change the sign in front of the bank to "Chase". You may need to get new checks later.

I bank with Chase now as well, but not by choice. I have had the same account for 25 years, and it's changed bank names 5 times!

[wilser]

THE SKY IS FALLING!

[MJ5150]

Originally Posted by wilser

THE SKY IS FALLING!

It feels that way up here, and it isn't even raining today.

-Mike

[WillPlay4Food]

Originally Posted by Jazz Ad

What protects depositors in these cases ?
Just curious.

The Federal Deposit Insurance Corporation, aka, the FDIC.

Also, JP Morgan was allowed to acquire WaMu for $1.9B so the bank will reopen as a different company today. All deposits are available.

[FL Knifemaker]

Originally Posted by Captain Chaos

I'll have to talk this with my dad as we both have money in there. We have been reading about this for 2 weeks and we don't want to lose any money.

My Wife and daughter has accounts with them. You wont loose money unless you exceed the FDIC insurred amount. If you have that much in the bank, it should have been in OTHER investments

[GregC]

Originally Posted by Visirale

It's only good for 100 grand...

Nah, any depositors, even above 100 grand, won't lose a cent. As WillPlay said, JP Morgan's taken over and all deposits are available.