In what is by far the largest bank failure in U.S. history, federal regulators seized Washington Mutual Inc. and struck a deal to sell the bulk of its operations to J.P. Morgan Chase & Co.
The closing represents the demise of what once was the largest U.S. thrift but came to symbolize many of the worst excesses of the mortgage boom. Federal regulators said WaMu has suffered an exodus of $16.7 billion in deposits since Sept. 15, leaving the Seattle thrift “with insufficient liquidity to meet its obligations.” As a result, WaMu was in “an unsafe and unsound condition to transact business,” according to the Office of Thrift Supervision.
While the exact structure of the transaction wasn’t immediately known, J.P. Morgan is expected to acquire Washington Mutual’s deposits and branches, as well as other operations. The deal isn’t expected to result in any hit to the Federal Deposit Insurance Corp.’s bank-insurance fund, according to a person familiar with the arrangement. But it’s likely that another arm of government would have to pick up the tab. Some analysts have worried that a WaMu failure could cost more than $20 billion.
Like I said this morning, “Uh Oh, Tinky Winky“
J.P. Morgan to Take Over Faltering WaMu
Robin Sidel, David Enrich and Dan Fitzpatrick
The Wall Street Journal
September 25, 2008