FDIC: WaMu the 'Largest Bank Failure Ever'
JPMorgan Chase snapped up Washington Mutual after a government shutdown.
Sept. 25, 2008 -- JPMorgan Chase & Co., the firm that snapped up Bear Stearns after its collapse, has picked up another bargain.
The nation's third-largest financial services firm has bought the functional assets of Washington Mutual, the nation's largest savings and loan, for $1.9 billion after the federal government shut down the bank this evening and held a quick auction.
"The change will have no impact on the bank's depositors or other customers," according to a government press release. "Business will proceed uninterrupted and bank branches will open on Friday morning as usual."
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JP Morgan said that the Washington Mutual name will continue for customers, though now a part of JP Morgan Chase. After the combination, 42 percent of American households will now be within 3 miles of a Chase retail bank, which includes Washington Mutual branches.
Analysts believe the acquisition will grow JPMorgan's retail operations into a behemoth with more than 5,400 retail branches and $644 billion in deposits after the two banks are integrated.
The failure of Washington Mutual is not only the largest on record, it dwarfs the previous record set over 24 years ago when Continental Illinois was shut down. Washington Mutual had $307 billion in assets compared to Continental's $40 billion (or $67.7 billion in 2008 dollars).
"WaMu is a very large institution and its resolutions could have posed significant challenges without a ready buyer," said FDIC chairwoman Sheila Bair.
The deal has been in the works for a while. With the aid of federal regulators, the massive thrift was searching for a suitor after its large mortgage assets began to sour and consumers started withdrawing money at an astounding pace.
WaMu had been added to the FDIC's watch list of banks in trouble sometime in the past three months. The last time the FDIC publicly disclosed the number of banks on the list was in June. At that time, there were 117 banks on the watch list.
Washington Mutual's federal regulator, the Office of Thrift Supervision, said that in the 10 days prior to the acquisition, customers had taken some $17 billion out of the bank. That's a little less than 10 percent of its total deposits.
