Washington Mutual, the nation’s largest savings and loan bank, was officially seized by the U.S. government late Thursday evening. The lion’s share of WaMu was sold to J.P. Morgan Chase for $1.9 billion. The seizure was made in an effort to avoid allowing WaMu to join the long list of financial institutions that have collapsed in the last few months, sending the American economy into its most precarious position since the Great Depression. J.P. Morgan Chase is the same company that bailed out the failed Bear Stearns in March of this year.
The seizure of WaMu is by far the largest bank seizure in American history. Until Thursday, the title of “largest government bailout of a bank” belonged to the Continental Bank and Loan Trust of Chicago which collapsed during the infamous savings and loans scandals of 1984. While Continental Bank and Loan needed the government to help secure its $40 billion in assets at the time of its collapse, Washington Mutual has securing over $300 billion in assets in need of backing. Experts estimate that had WaMu not been sold to J.P. Morgan Chase, the already strained FDIC could have been forced to provide $30 billion in cash to the failed bank in the coming weeks.
Like so many other crumbling financial institutions, Washington Mutual lost billions by offering mortgage loans to borrowers without collateral. As the U.S. housing market has collapsed, thousands of people have defaulted on those loans, leaving WaMu holding the bag.
Fueled by rumors of the bank’s imminent collapse, Washington Mutual customers withdrew nearly $16.5 billion from branches across the country over the last ten days.
The WaMu Board of Directors and CEO Alan Fishman were apparently among the last to know about their company’s seizure. Fishman was traveling by airplane while the deal was being brokered and only received news about it after he had landed when the deal was already completed.
What Does it Mean?
On the Washington Mutual website, a simple link cheerfully reports in warm, encouraging colors: “WaMu Customers: Welcome to JP Morgan Chase!” The link leads to an explanation of how account holders will be affected by the acquisition, stating that customers should notice no difference in the way that they conduct their banking and can go about business as usual.
The statement on the website asserts that the only essential difference at this point is that WaMu customers now have the extra security of the financial backing of JP Morgan Chase, so they can feel more secure that their deposits are safe and secure. WaMu customers will eventually have the opportunity to use Chase ATMs in addition to those at Washington Mutual branches in the coming months. Eventually, all Washington Mutual branches will become Chase banks and customers will begin to start seeing “Chase” on their bank statements instead of WaMu.
While multiple sources report that WaMu customers can feel confident that their funds are secure, shareholders of Washington Mutual will likely lose everything. Washington Mutual common stock will be sold starting Friday morning in an attempt to defray some of the cost of the bailout. The value of the stocks and credit score of the commercial banks can be checked at Omalaina yhteistyökumppanit. The log in on to the website should be free for the applicant.