Wamu seized, deposits go to JP Morgan
Breaking News – Thursday, September 25, 2008
The FDIC just seized all the assets of Washington-based thrift, WaMu, making it the largest bank failure in history.
The FDIC quickly brokered a deal where WaMu’s roughly $150 billion in deposits will be sold to JP Morgan Chase. It is reported that JP Morgan will be paying the FDIC about $2 billion to acquire WaMu’s deposits. Some sources estimated the value of the deal could have been worth as much as $10 billion.
JP Morgan is not taking on any of WaMu’s so-called toxic assets, things like home equity loans, but will probably take branches as part of the deal.
What will happen with the thrift’s $227 billion in real estate loans is still a question. More than half of those loans consists of home equity, option adjustable-rate mortgages, and subprime mortgages. That’s about $125 billion in bad loans.
Key Question: What happens at 9:00 a.m. Friday when WaMu branches are supposed to open?
According to CNBC, no one at WaMu knew about this until a few hours beforehand.
Indeed, it is quite a surprise, because the FDIC usually waits until a Friday to seize a bank and its assets, presumably for the two-day weekend cushion to avoid a run on deposits.
Why the FDIC moved today is unclear. It perhaps had something to do with WaMu’s share price, which hit its lowest level since the 1980s.
Federal regulators were quick to point out that the WaMu+JPMorgan Chase deal would not have any impact on the FDIC fund.
This year, 12 other banks have been forced to close their doors. Back in July, IndyMac was the largest collapse of an FDIC-insured institution since 1984. IndyMac had assets of $32 billion and deposits of $19 billion when it failed.
CNN Money reported WaMu had had combined assets of $307 billion and total deposits of $188 billion. The Seattle-PI reported deposits of $143 billion.
Further Reading:
- FDIC to Seize WaMu and Sell Deposits to JPMorgan (CNBC)
- WaMu’s Shotgun Wedding (Forbes)
- JP Morgan buys WaMu (CNN Money)
- JPMorgan Chase to buy bulk of WaMu (Seattle P-I)
Previous related stories from The Financial Brand:
- Massive bank failures must be on the way
- The post-WaMu blues: Chase has lost ‘that lovin’ feeling’
- Big bank brands, big consumer contradictions
- A “proven method” for undermining your brand
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Tags: failure, FDIC, meltdown, seized, WaMu
Filed under: Branding
September 25th, 2008 at 5:45 pm
WaMu not so much WhooHoo anymore.
September 25th, 2008 at 10:41 pm
At least their email marketing still works!
September 26th, 2008 at 6:34 am
This may be hard to believe, but CNBC reported that WaMu executives had no knowledge of this deal prior to its announcement. They learned just like the rest of us: On TV. The story broke around 4:00-4:30 Thursday. According to the Seattle P-I, employees heard about it from customers.
William, you might want to cut them some slack in this instance. Extraordinary, mitigating circumstances.