Washington Mutual Purchased by J.P.Morgan Chase

[Retire Soon]

Washington Mutual, the largest thrift in the U.S. wil be purchased by J.P. Morgan Chase in a deal that was orchestrated by federal regulators.

WaMu placed corporate profits before competent loan underwriting during the housing bubble and is now losing its independence because of excessive gambling with risky subprime mortgages.

J.P. Morgan to Take Over Faltering WaMu - WSJ.com

 

[haha]

There are interesting aspects to this. THE governemnt claims that there will be no draw on FDIC. How I don't know, because Morgan is is not interested in any of the loans. Who will create the offset to the deposit liabilities that they are acquiring?

Ha

 

[al_bundy]

among the stockholders getting wiped out is a private equity firm that invested $2 billion earlier this year

 

[Gotadimple]

See the presentation (web cast and handouts) from the JPMChase Investor Conference call at this link JPMorgan Chase: Investor presentations

 

[copyright1997reloaded]

There are interesting aspects to this. THE governemnt claims that there will be no draw on FDIC. How I don't know, because Morgan is is not interested in any of the loans. Who will create the offset to the deposit liabilities that they are acquiring?

Ha

JP Morgan Chase picked up the secured loans of the bank, e.g. mortgages, HELOC's, credit card, etc. It is the unsecured of the holding company that wasn't picked up (e.g. the preferred stock, other holding co debt). This is possible because first the OTS (Office of Thrift Supervision) took over the bank:
FDIC: Bank Information Information - Washington Mutual Bank, Henderson, NV and Washington Mutual Bank FSB, Park City, UT

Be very happy if you are not a Wamu equity, preferred stock, or other unsecured debt holder.

Also, Chase is taking an asset write down on the WAMU books to the tune of $30+ Billion, and in addition to the $1.9Billion paid to the FDIC also intends to raise $8 Billion in equity capital in order to keep up their Tier I capital ratio (It would have been impacted w/WAMU on thier books).

 

[Retire Soon]

WaMu had $300 Billion in assets, which will make it the largest bank failure in U.S. history. If JP Morgan had not bought the thrift, it may have cost the FDIC as much as $20 Billion.


One big problem, however: "A key unknown is: the fate of WaMus bad assets which include mortgage loans that have soured as housing markets tanked."

WaMu Fails, Is Sold Off to J.P. Morgan - WSJ.com

 

[haha]

JP Morgan Chase picked up the secured loans of the bank, e.g. mortgages, HELOC's, credit card, etc. It is the unsecured of the holding company that wasn't picked up (e.g. the preferred stock, other holding co debt). This is possible because first the OTS (Office of Thrift Supervision) took over the bank:
FDIC: Bank Information Information - Washington Mutual Bank, Henderson, NV and Washington Mutual Bank FSB, Park City, UT

Be very happy if you are not a Wamu equity, preferred stock, or other unsecured debt holder.

Also, Chase is taking an asset write down on the WAMU books to the tune of $30+ Billion, and in addition to the $1.9Billion paid to the FDIC also intends to raise $8 Billion in equity capital in order to keep up their Tier I capital ratio (It would have been impacted w/WAMU on thier books).

Thanks 1997.

Ha

 

[DragoMuseveni]

My main bank is WaMu, but a couple of Mondays ago I opened an account at Chase just to be safe. Sadly I was right to be cautious.

Oh well, Chase is so big now that if it goes belly up getting access to my account will probably be the least of my problems. Interesting times...

 

[almost there]

Agree, have a CD with Wamu. Not worried a bit about my $$$.
But do hope the Gov agree's on the 700b. If nothing else to signal the world all is not lost.

For the 1st time in a long time the Gov. could actually make a few bucks.
Hope they don't screw it up..........

Imagine in 3-5 yrs passing along a massive tax break!
Dream big.........

 

[DragoMuseveni]

Imagine in 3-5 yrs passing along a massive tax break!
Dream big.........

Thanks. You just made me laugh.

 

[Rambler]

My main bank is/was wamu, and I hold some shares that are now worthless. I moved most of my funds out a few months ago, should have sold the stock then too.

R

 

[chinaco]

JP Morgan is getting fat...

Those with money and sense make out.

 

[riskadverse]

This worked exactly as it should have. The free market worked. No part of the 700B bailout or even the FDIC were involved. The shareholder may not be happy, but they knew the risks when they bought the stock. I wonder how screwed up this transaction might have become if Ben and Henry and the congress had not been distracted elsewhere.

 

[mark500]

I had money in Penn Square Bank in OKC when it failed in 1982. I had to stand in a line and get my small cash amount out from the FDIC.
Penn Square failed pertly because of the oil market crash, but mostly greed and mismanagement.

What is Walmu's excuse? I suspect the same. Greed and mismanagement.
So much for all the advanced degrees in high finance working on wall street. What a bunch of greedy idiots.

 

[audreyh1]

This worked exactly as it should have. The free market worked. No part of the 700B bailout or even the FDIC were involved. The shareholder may not be happy, but they knew the risks when they bought the stock. I wonder how screwed up this transaction might have become if Ben and Henry and the congress had not been distracted elsewhere.

The FDIC was involved. They seized WAMU. JP Morgan then did the deal with the FDIC. Fortunately for us taxpayers, JP Morgan took on the assets and paid FDIC for them. It didn't have to happen that way - FDIC might have been stuck with it.

Audrey

 

[ziggy29]

The FDIC was involved. They seized WAMU. JP Morgan then did the deal with the FDIC. Fortunately for us taxpayers, JP Morgan took on the assets and paid FDIC for them. It didn't have to happen that way - FDIC might have been stuck with it.

And it also appears that under the terms of this deal, *all* WaMu deposits -- even those over $100,000 -- are covered (at least for now):

Welcome WaMu

Just as in 1893 and 1907, here comes JP Morgan...this time the business, not the tycoon.

 

[Canadian Grunt]

The FDIC was involved. They seized WAMU. JP Morgan then did the deal with the FDIC. Fortunately for us taxpayers, JP Morgan took on the assets and paid FDIC for them. It didn't have to happen that way - FDIC might have been stuck with it.

Audrey

Actually, the FDIC doesn't own the assets. It insures the deposits and secures the bank to ensure the stability of the banking system, while providing the liquidity for deposits. Securities and deposits are separate issues.

From what I can tell JP Morgan bought the WAMU outlets and took over the deposits from the FDIC. I expect the bad debt portion of the assets will be liquidated on the market or absorbed by the Fed.

We will have to see how this deal shakes out as more details become evident.

 

[retire@40]

What we need is George Bailey.

YouTube - It's A Wonderful Life bank run (full version)

 

[LOL!]

And all this appears to have not affected the stock market very much. Just a normal day today ... haven't even given up the gains of yesterday.

 

[Gotadimple]

Actually, Chase got an excellant deal. $1.9B for 900B in assets - in July, they offer $7B and Kerry Killenger and the (now former) WAMU board turned them down.

Greed, egomania, and excess, indeed.

-- Rita

 

[ChrisC]

Actually, the FDIC doesn't own the assets. It insures the deposits and secures the bank to ensure the stability of the banking system, while providing the liquidity for deposits. Securities and deposits are separate issues.

From what I can tell JP Morgan bought the WAMU outlets and took over the deposits from the FDIC. I expect the bad debt portion of the assets will be liquidated on the market or absorbed by the Fed.

We will have to see how this deal shakes out as more details become evident.

Actually, the FDIC did own both the assets and liabilities of WAMU when it was closed and when the FDIC was appointed as Receiver of WAMU. It might have owned the assets and liabilities for a nano-second. The FDIC then sold substantially all the assets (including the deposit franchise) and all the deposit liabilities (both insured and uninsured) of WAMU to JP Morgan, which paid $1.9 billion to the FDIC for that.

In the highly arcane trade of these transactions, this is known as a "whole bank" transaction because, except for shareholders and some general creditors, the "whole bank" of the failing institution is transferred to another bank.

The $1.9 billion will be used to pay administrative expenses of the FDIC as receiver, general creditors of WAMU, and lastly shareholders of WAMU if anything remains.

 

[al_bundy]

And all this appears to have not affected the stock market very much. Just a normal day today ... haven't even given up the gains of yesterday.

volume is extremely low because everyone is waiting on what happens with the bailout

volume on the nasdaq is around 360,000,000 shares so far. this time of year it should be around 1,000,000,000 on an average day and around 2,000,000,000 for the entire day

 

[ziggy29]

volume is extremely low because everyone is waiting on what happens with the bailout

I think so. If no deal is imminent by 3 PM Eastern Time today, watch the free-fall...

 

[al_bundy]

yep

i bought 2 ETF's a few days ago when it looked like the bailout was going to happen. sold them 8am this morning for a small 5% loss.

if there is no deal very few will want to hold stock into the weekend when anything can happen

 

[Canadian Grunt]

Actually, the FDIC did own both the assets and liabilities of WAMU when it was closed and when the FDIC was appointed as Receiver of WAMU. It might have owned the assets and liabilities for a nano-second. The FDIC then sold substantially all the assets (including the deposit franchise) and all the deposit liabilities (both insured and uninsured) of WAMU to JP Morgan, which paid $1.9 billion to the FDIC for that.

In the highly arcane trade of these transactions, this is known as a "whole bank" transaction because, except for shareholders and some general creditors, the "whole bank" of the failing institution is transferred to another bank.

The $1.9 billion will be used to pay administrative expenses of the FDIC as receiver, general creditors of WAMU, and lastly shareholders of WAMU if anything remains.

Not all the assets. I expect the really bad debt will be cleaved from the assets and assumed by the Fed. There is more to this than is implied. No way did JP Morgan take on the worst of the bad debt as the credit crises is still not over.


http://www.nytimes.com/2008/09/26/business/26wamu.html?hp