| Badanov posted a similar story about the same time as I did, and you know how we mods hate duplicates ;-) His comment: Another "shotgun wedding" with JPM ponying up a tiny entry fee. |
The U.S. government closed Seattle-based Washington Mutual amid customer withdrawals of $16.7 billion since Sept. 15, the Office of Thrift Supervision said in a statement. WaMu had ``insufficient liquidity'' and was in an ``unsound'' condition, the OTS said.
WaMu's fate played out as Congress tried to reach an accord that will ease the global credit crunch, which has already driven Lehman Brothers Holdings Inc. and IndyMac Bancorp out of business, and Bear Stearns Cos. and Merrill Lynch & Co. into hastily arranged rescues. WaMu in March rebuffed a takeover offer from JPMorgan that WaMu valued at $4 a share. In most bank seizures, little or nothing is left for shareholders.``JPMorgan is getting a steal compared with what they were going to pay,'' said Scott Adams, a pension and investment analyst at the American Federation of State, County and Municipal Employees in Oakland, California, which owns WaMu shares. ``It's very tragic.''
WaMu collapsed after its credit rating was slashed to junk and potential suitors passed on making a bid. Facing $19 billion of losses on soured mortgage loans, the lender put itself up for sale last week.
New York-based JPMorgan won't acquire liabilities of the lender, including claims by shareholders and subordinated and senior debt holders, the Federal Deposit Insurance Corp. said. JPMorgan said it is adding branches in California, Washington and Florida and will have 5,400 offices with about $900 billion in deposits, the most of any U.S. bank. The branches will carry the Chase brand and will be integrated by 2010, JPMorgan said. They will be open for business tomorrow as usual, the OTS said in its statement.
WaMu had about 2,300 branches and $182 billion of customer deposits at the end of June. Its $310 billion of assets dwarf those of Continental Illinois Corp., previously the largest failed bank, which had $40 billion ($83 billion in 2008 dollars) when it was taken over in 1984. WaMu has fallen 95 percent in 12 months on losses tied to subprime lending and lost $6.3 billion in the past three quarters. It kept skidding even after joining a list of financial companies the U.S. Securities and Exchange Commission protected from short selling in an effort to stabilize stock markets.
WaMu was the second-biggest provider of option ARMs, behind Wachovia Corp., with $54 billion held in its portfolio in the first quarter, according to Inside Mortgage Finance. Of the $230 billion in loans secured by real estate at the end of the second quarter, $16.9 billion were subprime mortgages. WaMu, which ranked sixth among U.S. mortgage companies last year, was the 11th-biggest subprime lender in 2006, according to Inside Mortgage Finance.
WaMu estimated losses of as much as $19 billion in the next 2-1/2 years. Standard & Poor's cut the bank's credit rating twice in nine days as chances decreased that any deal wouldn't be a buyout of the whole company, leaving creditors of the holding company to face substantial losses.