Friday, September 26, 2008

WaMu gets Chased into history

WooHoo:

JPMorgan Chase became the biggest U.S. bank by deposits, acquiring Washington Mutual's branch network for $1.9 billion after the thrift was seized in the largest U.S. bank failure in history.

Customers of WaMu withdrew $16.7 billion from accounts since Sept. 16, leaving the Seattle-based bank "unsound," the Office of Thrift Supervision said late Thursday. WaMu's branches will open today and depositors will have full access to all their accounts, Sheila Bair, chairman of the Federal Deposit Insurance Corp., said on a conference call.

Well, there go WaMu's socially liberal policies. I had what some may consider a lot of money (and some would think a mere pittance) in WaMu, but never worried about it, even when I learned that the FDIC itself was undercapitalized. I knew the feds would never let them go belly-up, and I knew that before they began rescuing mortgage companies and insurance companies.

WaMu turned down offers of $8 a share earlier this year and $4 a share just a few weeks ago. Today...

... WaMu, down 95 percent in the past year, dropped to 45 cents in extended trading following the announcement, which came after the close of regular trading.

David Bonderman's TPG Inc., which led a $7 billion capital infusion for WaMu earlier this year, lost most of its initial $2 billion investment. TPG, based in Forth Worth, Texas, said in a statement Thursday it was "dissatisfied with the loss" and that the WaMu investment was a "small part of assets."

New York-based JPMorgan, which separately announced plans to raise $8 billion by selling common stock, had its outlook lowered to negative by Moody's Investors Service. Moody's left its Aa2 rating on JPMorgan unchanged.

JPMorgan won't acquire WaMu's liabilities, including claims by shareholders and subordinated and senior debt holders, the FDIC said. JPMorgan paid $10 a share for Bear Stearns in March as the New York-based securities firm teetered on the brink of bankruptcy.

"This is one of the reasons I own JPMorgan: They're going to win from all this," said Anton Schutz, president of Mendon Capital Advisors Corp. in Rochester, New York. "They're taking on credit risk, but they're not taking on any debt obligations."


JPMChase has bought Bear Stearns and WaMu in the past two months; Bank of America owns Countrywide and Merrill Lynch. The last remaining independent brokerage houses in the US, Morgan Stanley and Goldman Sachs (Henry Paulson's former employer), have been OK'd to become banks themselves. But the Chinese are turning off the spigot, so who knows where it goes from here, especially if John McInsane and the House Republicans succeed in derailing Bush's bailout.

And in other news, the stock market is rocketing downward again this morning. Update (at market closing): A nice finish to a wild day.

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