Friday September 26, 05:59 PM
WaMu collapse stokes jitters in fast-paced financial crisis
By Veronica Smith
 |
WASHINGTON (AFP) - The collapse of Washington Mutual (NYSE: WM - news) , the nation's biggest bank failure ever, and the sale of its assets to JPMorgan Chase highlighted the deep troubles of the sector amid a fast-moving US financial crisis.
The collapse of WaMu, one of the largest US savings and loans, late Thursday came as the government and lawmakers battled over a 700-billion-dollar rescue of troubled financial firms.
WaMu, heavily exposed to bad mortgage investments, was closed by the Federal Deposit Insurance Corporation. The Seattle, Washington-based thrift had 307 billion dollars in assets.
It was the largest bank failure in US history, dwarfing the collapse of Continental Illinois Bank, with 40 billion dollars in assets, in 1984.
JPMorgan Chase bought WaMu's deposits, assets and some liabilities for 1.9 billion dollars. JPMorgan Chase said Friday it plans to sell 10 billion dollars in common stock to raise capital, two billion dollars more than it announced late Thursday.
Its shares leapt 2.39 percent to 44.50 dollars in midday trading. WaMu shares were virtually worthless, sinking 90.3 percent to 16 cents.
JPMorgan Chase said in a statement late Thursday its purchase of WaMu, which had about 188 billion dollars in deposits, creates the largest US depository institution with more than 900 billion dollars in customer deposits.
"This deal makes excellent strategic sense for our company and our shareholders," JPMorgan Chase chairman Jamie Dimon said in the statement.
The takeover marked the second time in six months JPMorgan Chase has swooped into a government-engineered buyout of a failing bank.
In March, it snapped up Wall Street investment bank Bear Stearns (BSC - news) for a bargain one billion dollars.
The FDIC, which insures all US bank deposits up to 100,000 dollars, assured WaMu customers that their money was safe.
"For all depositors and other customers of Washington Mutual Bank, this is simply a combination of two banks," FDIC chairwoman Stella Blair said late Thursday.
"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."
But the bank failure rang alarm bells as President George W. Bush's administration and Congress wrangle over how to help troubled banks in the worst financial crisis since the 1930s Great Depression.
"The government-brokered sale of Washington Mutual is the latest sign of the perilous situation facing our financial system and our economy," Democratic presidential candidate Senator Barack Obama said late Thursday.
"The failures of our financial institutions threaten economic instability, jobs, and the incomes of American families," Obama said.
His Republican rival, Senator John McCain, said in a statement Friday: "Today's financial crisis threatens all Americans and the sale of Washington Mutual is just the latest indicator of the stresses in our financial markets that threaten to cut off the credit needed by our families, businesses, and state and local governments."
|
|
|
Send Article by Email
Send Article by IM
Blog This with Y! 360
Printable View
