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Insight on JPMorgan WaMu buy out- the biggest bank failure in history

By Amarendra Bhushan for CEOWORLD Magazine Updated:September 26, 2008

This is unfortunate, but it should serve as a wake up call to all American investors. If you want to protect your money, you need to diversify and invest at least some of it overseas. As a business and financial expert, I will pause for a moment of silence for the late, great Washington Mutual. Many of my friends worked and work for WaMu in their gleaming 55 story tall WaMu Tower headquarters in downtown Seattle.

Federal regulators seized Washington Mutual Inc. and sold nearly all of its operations to JPMorgan Chase & Co. for $1.9 billion. It is the largest bank failure in US history. WaMu, previously the nation’s largest savings and loan, had been reeling from bad mortgage loans and put itself up for sale last week. The feds took action because no serious bidders emerged. The move averts a government bailout of the bank’s depositors. 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.

WaMu held more than $200 billion in deposits, far more than any bank that has ever gone under. The FDIC, which insures bank deposits, would have paid out about half the money in its fund without a deal, the Post notes. The acquisition will give JPMorgan a foothold in California and make it a rival of Bank of America, the nation’s biggest commercial bank. In exchange, JPMorgan Chase will pay approximately $1.9 billion to the Federal Deposit Insurance Corporation. Separately, the company announced plans to raise $8 billion in additional capital through the sale of stock as part of the deal.

Here’s what you need to know:

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.
Regulators stepped in and helped facilitate the deal. To read what the regulators said about the move.
Wamu is the 13th insured institution to fail in 2008. Worst year since 1994! See the FDIC’s list of dead banks
The bank will be open as usual for business, regulators said. “For all depositors and other customers of Washington Mutual Bank, this is simply a combination of two banks,” FDIC Chairman Sheila C. 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.” WaMu customers with questions should call their banking representative at 1-800-788-7000 or visit www.wamu.com
DataQuick says WaMu in the first 7 months of ‘08 was the #4 lender in O.C. and statewide. In O.C. 3,591 loans for $1.26 billion; California was 49,152 loans for $17.1 billion.

“We think it is a great thing for our company,” JPMorgan Chase Chairman and CEO Jamie Dimon said in a conference call with investors late Thursday night.

As a result of the acquisition, the New York City-based JPMorgan Chase will now boast some 5,400 branches in 23 states.

Federal regulators, who helped shepherd the deal, stressed that the transition for WaMu customers would be “seamless.”

“There will be no interruption in services and bank customers should expect business as usual come Friday morning,” FDIC Chairman Sheila Bair said in a statement.

It remains unclear as to whether the bank will continue to operate under the old name or if some new name will be used. I would expect in time to see the Chase name applied. Darwinism is working well in our economic system….except for the government trying to play God by manipulating our capitalistic DNA. My condolences to the employees and investors of what was once WaMu..

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