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Unlucky Number 13: Washington Mutual Fails


JP Morgan, backed by regulators, picks up deposit base on the cheap.

It's official: The biggest bank failure in US history is now, well, history.

Last night, troubled thrift Washington Mutual (WM) collapsed into the open arms of JPMorgan (JPM), who again picked up a former competitor courtesy of a government-orchestrated bailout. The failure marks the 13th bank failure this year. Minyanville's Why Wall Street Will Never Be the Same

In the past 10 days, since the financial crisis began to escalate after the failure of Lehman Brothers and the government's seizure of AIG (AIG), WaMu lost almost $17 billion in deposits, according to the Wall Street Journal. This exodus of cash left it in a precarious position, one regulators felt was too weak to allow the bank to continue as an independent entity.

Details are hazy, but JPMorgan will acquire the Seattle-based bank's deposits, retail branches and certain other operations. Initial reports indicate the FDIC's war chest to protect against bank failures won't need to be tapped (some feared WaMu's collapse would cost more than $20 billion to clean up). It remains unclear what will happen to WaMu's battered loan portfolio.

Is there another Bear Stearns out there?
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WaMu has been trying to sell itself for weeks, after its share price fell so low that raising capital through traditional means became all but impossible, but potential suitors like Wells Fargo (WFC) and Citibank (C) balked when they got a good look at the bank's books. Saddled with future losses on its deteriorating mortgage portfolio, even WaMu's alluring footprint on the West Coast couldn't coax an offer out of its suitors.

JPMorgan CEO Jamie Dimon, however, seems to have a penchant for making deals endorsed by the federal government.
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$600 on deposit at WM, err, JPM

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