Unlucky Number 13: Washington Mutual Fails
JP Morgan, backed by regulators, picks up deposit base on the cheap.
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.
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.
Minyanville's Buzz & Banter - 14 day FREE trial
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.
The information on this website solely reflects the analysis of or opin=
=3D =3D3D ion about the performance of securities and financial markets by =
the wr=3D iter=3D3D s whose articles appear on the site. The views expresse=
d by the wri=3D ters are=3D3D not necessarily the views of Minyanville Medi=
a, Inc. or members=3D of its man=3D3D agement. Nothing contained on the web=
site is intended to con=3D stitute a recom=3D3D mendation or advice address=
ed to an individual investor =3D or category of inve=3D3D stors to purchase=
, sell or hold any security, or to =3D take any action with re=3D3D spect t=
o the prospective movement of the securit=3D ies markets or to solicit t=3D=
3D he purchase or sale of any security. Any inv=3D estment decisions must b=
e made =3D3D by the reader either individually or in =3D consultation with =
his or her invest=3D3D ment professional. Minyanville write=3D rs and staff=
may trade or hold position=3D3D s in securities that are discuss=3D ed in =
articles appearing on the website. Wr=3D3D iters of articles are requir=3D =
ed to disclose whether they have a position in =3D3D any stock or fund disc=
us=3D sed in an article, but are not permitted to disclos=3D3D e the size o=
r direct=3D ion of the position. Nothing on this website is intende=3D3D d =
to solicit bus=3D iness of any kind for a writer's business or fund. Mi=
ny=3D3D anville mana=3D gement and staff as well as contributing writers wi=
ll not respo=3D3D nd to em=3D ails or other communications requesting inves=
Copyright 2011 Minyanville Media, Inc. All Rights Reserved.
Daily Recap Newsletter