JPMorgan Chase scoops up WaMu assets for $1.9 billion

— -- "For all depositors and other customers of Washington Mutual Bank, this is simply a combination of two banks," said FDIC Chairwoman Sheila Bair. "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," Bair said.

Washington Mutual's shares have plunged nearly 90% in the past year on concerns about its large holdings of subprime mortgages. Before it can resume normal operations, it needs to sell off those investments. That prospect has reportedly scared off other potential buyers.

On Wednesday, credit-rating agency Standard & Poor's cut WaMu's credit rating and preferred stock rating further into junk status, noting an increased likelihood that any sale of the thrift would only be done in piecemeal fashion.

The failure of Washington Mutual would have dwarfed the largest bank collapse in U.S. history, Continental Illinois National Bank in 1984, with $33.6 billion in assets. WaMu and its subsidiaries had assets of $309.73 billion as of June 30.

A federal takeover of WaMu would have placed a serious strain on the FDIC's deposit insurance fund, which has been put under pressure by a growing number of bank failures.

In July, the FDIC took over California-based mortgage lender IndyMac. The takeover tipped the federal deposit insurance fund, now at around $45.2 billion, below the minimum target level set by Congress.

With more banks expected to fail, Bair has not ruled out the possibility of going to the Treasury for a short-term loan for working capital at some point. Next month, Bair plans to propose increasing the premiums paid by banks and thrifts to replenish the fund.

Washington Mutual shares fell 73.4% in after-hours trading to 45 cents.