FDIC to Seize WaMu

09-26-2008, 02:29 AM

FDIC to Seize WaMu and Sell Deposits to JPMorgan
[link to www.cnbc.com]

The Federal Deposit Insurance Corp will seize Washington Mutual and sell its deposits to JPMorgan Chase for an undisclosed sum, CNBC has learned. The deal is expected to be announced during a Thursday night conference call at 9:15 p.m. ET.

Federal regulators have been heavily involved in putting together the transaction, which comes as WaMu is besieged by a huge number of bad mortgage loans on its books.

The exact details of the deal aren't known as yet, but JPMorgan [JPM 43.46 2.96 (+7.31%) ] is expected to acquire WaMu's deposits and branches, as well as other operations. The deal isn't expected to expected to result in any hit to the bank-insurance fund.

Washington Mutual [WM 1.69 -0.57 (-25.22%) ] had been trying to sell itself the past two weeks. Interested banks included Citigroup [C 19.41 0.45 (+2.37%) ] , HSBC Holdings [HBC 81.59 1.79 (+2.24%) ] , Toronto-Dominion Bank [TD 62.00 --- UNCH (0) ] and Wells Fargo [WFC 34.12 -0.15 (-0.44%) ] .

WaMu came under further pressure to sell Wednesday when Standard & Poor's slashed its credit rating deep into "junk" territory. The thrift replaced its chief executive this month after suffering losses totaling $6.3 billion over the previous three quarters.

It has projected $19 billion in mortgage-related losses through 2011, but analysts have said credit losses could reach $30 billion.
Complicating the sale process is what to do with the thrift's $227 billion book of real estate loans, more than half of which consists of home equity loans, option adjustable-rate mortgages, and subprime mortgages.

It was not immediately clear how much of WaMu's troubled loans might be eligible for Washington's $700 billion financial industry bailout program.

WaMu has a significant presence in California and Florida, two of the states hardest hit by the nation's housing crisis. But its 2,239-branch network could appeal to many lenders looking to expand in retail banking, especially in the western United States and the New York City area.

WaMu ended August with $143 billion in retail deposits -- roughly triple the size of the entire Federal Deposit Insurance Corp fund that backs customer deposits. It has also said it expects to end the quarter with a "well-capitalized" status well in excess of federal minimums.
© 2008 CNBC

Merlyn · 09-26-2008, 04:11 AM

The Dervivative domino's just keep faliing.

Note Washington Mutual $188 billion of deposits are greater than the curent FDIC fund $45.2 billion thus JPMorgan Chase is the "saviour".

Everyone ... you may want to take steps to protect yourself financially.

http://biz.yahoo.com/rb/080925/busin...nbiz.html?.v=3
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WaMu is largest U.S. bank failure
Thursday September 25, 10:20 pm ET

By Elinor Comlay and Jonathan Stempel

NEW YORK/WASHINGTON (Reuters) - Washington Mutual Inc (NYSE:WM - News) was closed by the U.S. government in by far the largest failure of a U.S. bank, and its banking assets were sold to JPMorgan Chase & Co (NYSE:JPM - News) for $1.9 billion.

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The rescue marks a historic step to clean up a U.S. financial system littered with toxic mortgage debt.

Washington Mutual, the largest U.S. savings and loan, was closed by the federal Office of Thrift Supervision, and the Federal Deposit Insurance Corp was named receiver. Customers should expect business as usual on Friday, the FDIC said.

The bailout came after the thrift suffered deposit outflows of $16.7 billion since September 15, the OTS said.

"With insufficient liquidity to meet its obligations, WaMu was in an unsafe and unsound condition to transact business," the OTS said.

Seattle-based Washington Mutual has about $307 billion of assets and $188 billion of deposits, regulators said. The nation's largest previous banking failure was Continental Illinois National Bank & Trust, which had $40 billion of assets when it collapsed in 1984.

The transaction gives JPMorgan roughly 5,400 branches, and fulfills JPMorgan Chief Executive Jamie Dimon's long-held goal of becoming a retail bank force in the western United States.

It comes four months after JPMorgan acquired the failing investment bank Bear Stearns Cos at a fire-sale price.

"Jamie Dimon is clearly feeling that he has an opportunity to grab market share, and get it at fire-sale prices," said Matt McCormick, a portfolio manager at Bahl & Gaynor Investment Counsel in Cincinnati. "He's becoming an acquisition machine."

On a conference call, JPMorgan said the transaction will add to earnings immediately, and result in $1.5 billion of annual cost savings, including from the closure of less than 10 percent of the combined company's branches. He also said JPMorgan plans to issue $8 billion of stock.

The acquisition does not cover Washington Mutual's equity, senior debt and subordinated debt holders, the FDIC. The FDIC said the transaction will not affect its roughly $45.2 billion deposit insurance fund.

The transaction also comes as Washington wrangles over the fate of a $700 billion bailout of the financial services industry, which has been battered by mortgage defaults and tight credit conditions, and evaporating investor confidence.

"It removes an uncertainty from the market," said Shane Oliver, head of investment strategy at AMP Capital in Sydney. "The problem is that markets are in a jittery stage. Washington Mutual provides another reminder how tenuous things are."

Washington Mutual's collapse is the latest of a series of takeovers and outright failures that have transformed the American financial landscape and wiped out hundreds of billions of dollars of shareholder wealth.

These include the disappearance of Bear, government takeovers of mortgage companies Fannie Mae (Pacific:FNM - News) and Freddie Mac (Pacific:FRE - News) and the insurer American International Group Inc (NYSE:AIG - News), the bankruptcy filing of Lehman Brothers Holdings Inc (Other OTC:LEHMQ.PK - News), and Bank of America Corp's (NYSE:BAC - News) planned purchase of Merrill Lynch & Co (NYSE:MER - News).

JPMorgan, based in New York, ended June with $1.78 trillion of assets, $722.9 billion of deposits and 3,157 branches. Washington Mutual had 2,239 branches and 43,198 employees.

Shares of Washington Mutual plunged $1.24 to 45 cents in after-hours trading after news of a JPMorgan transaction surfaced. JPMorgan shares rose $1.04 to $44.50 after hours.

119-YEAR HISTORY

The transaction ends exactly 119 years of independence for Washington Mutual, whose predecessor was incorporated on September 25, 1889, "to offer its stockholders a safe and profitable vehicle for investing and lending," according to the thrift's website. This helped Seattle residents rebuild after a fire torched the city's downtown.

It also follows more than a week of sale talks in which Washington Mutual attracted interest from several suitors.

These included Banco Santander SA (MCE:SAN.MC - News), Citigroup Inc (NYSE:C - News), HSBC Holdings Plc (LSE:HSBA.L - News), Toronto-Dominion Bank (Toronto:TD.TO - News) and Wells Fargo & Co (NYSE:WFC - News), as well as private equity firms Blackstone Group LP (NYSE:BX - News) and Carlyle Group (CYL.UL), people familiar with the situation said.

Less than three weeks ago, Washington Mutual ousted Chief Executive Kerry Killinger, who drove the thrift's growth as well as its expansion in subprime and other risky mortgages, and replaced him with Alan Fishman, the former chief executive of Brooklyn, New York's Independence Community Bank Corp.

The transaction also appears to be a costly defeat for David Bonderman and his private equity firm TPG Inc (TPG.UL), the lead investor in a $7 billion capital raise by the thrift in April. TPG was unavailable for comment.

Washington Mutual's roughly $227 billion book of real estate loans put the thrift at the top of the critical list of U.S. lenders, analysts said. More than half of this portfolio was in home equity loans and in adjustable-rate mortgages and subprime mortgages that are now considered risky.

Thursday's transaction makes JPMorgan close in size to Citigroup, now the largest U.S. bank by assets.

JPMorgan has surpassed Bank of America in size. That bank would become the largest U.S. bank once it completes its planned purchase of Merrill Lynch, expected in the first quarter of 2009.

DIMON POUNCES

The deal is the latest ambitious move by Dimon.

Once a golden child at Citigroup before his mentor Sanford "Sandy" Weill engineered his ouster in 1998, Dimon has carved for himself something of a role as a Wall Street savior.

Dimon joined JPMorgan in 2004 after selling his Bank One Corp to the bank for $56.9 billion, and became chief executive at the end of 2005. While results have been hurt by the credit crisis, JPMorgan has suffered less than many rivals.

Some historians see parallels between him and the legendary financier John Pierpont Morgan, who ran J.P. Morgan & Co and was credited with intervening to end a banking panic in 1907.

Bank of America Chief Executive Kenneth Lewis has also been credited with helping reduce damage on Wall Street with his acquisitions this year of Merrill Lynch and Countrywide Financial Corp, the nation's largest mortgage lender.

Washington Mutual has a major presence in California and Florida, two of the states hardest hit by the housing crisis. It also has a big presence in the New York City area.

The thrift amassed $6.3 billion of losses in the nine months ended June 30. It had also projected $19 billion of mortgage losses through 2011, but analysts said credit losses could reach as high as $30 billion.

"It is surprising that it has hung on for as long as it has," said Nancy Bush, an analyst at NAB Research LLC.

(Additional reporting by Paritosh Bansal, Christian Plumb and Dan Wilchins; Jessica Hall in Philadelphia; John Poirier in Washington, D.C. and Kevin Lim in Singapore; Editing by Gary Hill)

09-26-2008, 02:29 AM	#1
Survivor Guest Posts: n/a	FDIC to Seize WaMu FDIC to Seize WaMu and Sell Deposits to JPMorgan [link to www.cnbc.com] The Federal Deposit Insurance Corp will seize Washington Mutual and sell its deposits to JPMorgan Chase for an undisclosed sum, CNBC has learned. The deal is expected to be announced during a Thursday night conference call at 9:15 p.m. ET. Federal regulators have been heavily involved in putting together the transaction, which comes as WaMu is besieged by a huge number of bad mortgage loans on its books. The exact details of the deal aren't known as yet, but JPMorgan [JPM 43.46 2.96 (+7.31%) ] is expected to acquire WaMu's deposits and branches, as well as other operations. The deal isn't expected to expected to result in any hit to the bank-insurance fund. Washington Mutual [WM 1.69 -0.57 (-25.22%) ] had been trying to sell itself the past two weeks. Interested banks included Citigroup [C 19.41 0.45 (+2.37%) ] , HSBC Holdings [HBC 81.59 1.79 (+2.24%) ] , Toronto-Dominion Bank [TD 62.00 --- UNCH (0) ] and Wells Fargo [WFC 34.12 -0.15 (-0.44%) ] . WaMu came under further pressure to sell Wednesday when Standard & Poor's slashed its credit rating deep into "junk" territory. The thrift replaced its chief executive this month after suffering losses totaling $6.3 billion over the previous three quarters. It has projected $19 billion in mortgage-related losses through 2011, but analysts have said credit losses could reach $30 billion. Complicating the sale process is what to do with the thrift's $227 billion book of real estate loans, more than half of which consists of home equity loans, option adjustable-rate mortgages, and subprime mortgages. It was not immediately clear how much of WaMu's troubled loans might be eligible for Washington's $700 billion financial industry bailout program. WaMu has a significant presence in California and Florida, two of the states hardest hit by the nation's housing crisis. But its 2,239-branch network could appeal to many lenders looking to expand in retail banking, especially in the western United States and the New York City area. WaMu ended August with $143 billion in retail deposits -- roughly triple the size of the entire Federal Deposit Insurance Corp fund that backs customer deposits. It has also said it expects to end the quarter with a "well-capitalized" status well in excess of federal minimums. © 2008 CNBC

09-26-2008, 04:11 AM	#2
Merlyn Avalon Senior Member Join Date: Sep 2008 Location: Colorado,USA Posts: 108	Re: FDIC to Seize WaMu The Dervivative domino's just keep faliing. Note Washington Mutual $188 billion of deposits are greater than the curent FDIC fund $45.2 billion thus JPMorgan Chase is the "saviour". Everyone ... you may want to take steps to protect yourself financially. http://biz.yahoo.com/rb/080925/busin...nbiz.html?.v=3 -------------------------------------------------------------------- WaMu is largest U.S. bank failure Thursday September 25, 10:20 pm ET By Elinor Comlay and Jonathan Stempel NEW YORK/WASHINGTON (Reuters) - Washington Mutual Inc (NYSE:WM - News) was closed by the U.S. government in by far the largest failure of a U.S. bank, and its banking assets were sold to JPMorgan Chase & Co (NYSE:JPM - News) for $1.9 billion. ADVERTISEMENT The rescue marks a historic step to clean up a U.S. financial system littered with toxic mortgage debt. Washington Mutual, the largest U.S. savings and loan, was closed by the federal Office of Thrift Supervision, and the Federal Deposit Insurance Corp was named receiver. Customers should expect business as usual on Friday, the FDIC said. The bailout came after the thrift suffered deposit outflows of $16.7 billion since September 15, the OTS said. "With insufficient liquidity to meet its obligations, WaMu was in an unsafe and unsound condition to transact business," the OTS said. Seattle-based Washington Mutual has about $307 billion of assets and $188 billion of deposits, regulators said. The nation's largest previous banking failure was Continental Illinois National Bank & Trust, which had $40 billion of assets when it collapsed in 1984. The transaction gives JPMorgan roughly 5,400 branches, and fulfills JPMorgan Chief Executive Jamie Dimon's long-held goal of becoming a retail bank force in the western United States. It comes four months after JPMorgan acquired the failing investment bank Bear Stearns Cos at a fire-sale price. "Jamie Dimon is clearly feeling that he has an opportunity to grab market share, and get it at fire-sale prices," said Matt McCormick, a portfolio manager at Bahl & Gaynor Investment Counsel in Cincinnati. "He's becoming an acquisition machine." On a conference call, JPMorgan said the transaction will add to earnings immediately, and result in $1.5 billion of annual cost savings, including from the closure of less than 10 percent of the combined company's branches. He also said JPMorgan plans to issue $8 billion of stock. The acquisition does not cover Washington Mutual's equity, senior debt and subordinated debt holders, the FDIC. The FDIC said the transaction will not affect its roughly $45.2 billion deposit insurance fund. The transaction also comes as Washington wrangles over the fate of a $700 billion bailout of the financial services industry, which has been battered by mortgage defaults and tight credit conditions, and evaporating investor confidence. "It removes an uncertainty from the market," said Shane Oliver, head of investment strategy at AMP Capital in Sydney. "The problem is that markets are in a jittery stage. Washington Mutual provides another reminder how tenuous things are." Washington Mutual's collapse is the latest of a series of takeovers and outright failures that have transformed the American financial landscape and wiped out hundreds of billions of dollars of shareholder wealth. These include the disappearance of Bear, government takeovers of mortgage companies Fannie Mae (Pacific:FNM - News) and Freddie Mac (Pacific:FRE - News) and the insurer American International Group Inc (NYSE:AIG - News), the bankruptcy filing of Lehman Brothers Holdings Inc (Other OTC:LEHMQ.PK - News), and Bank of America Corp's (NYSE:BAC - News) planned purchase of Merrill Lynch & Co (NYSE:MER - News). JPMorgan, based in New York, ended June with $1.78 trillion of assets, $722.9 billion of deposits and 3,157 branches. Washington Mutual had 2,239 branches and 43,198 employees. Shares of Washington Mutual plunged $1.24 to 45 cents in after-hours trading after news of a JPMorgan transaction surfaced. JPMorgan shares rose $1.04 to $44.50 after hours. 119-YEAR HISTORY The transaction ends exactly 119 years of independence for Washington Mutual, whose predecessor was incorporated on September 25, 1889, "to offer its stockholders a safe and profitable vehicle for investing and lending," according to the thrift's website. This helped Seattle residents rebuild after a fire torched the city's downtown. It also follows more than a week of sale talks in which Washington Mutual attracted interest from several suitors. These included Banco Santander SA (MCE:SAN.MC - News), Citigroup Inc (NYSE:C - News), HSBC Holdings Plc (LSE:HSBA.L - News), Toronto-Dominion Bank (Toronto:TD.TO - News) and Wells Fargo & Co (NYSE:WFC - News), as well as private equity firms Blackstone Group LP (NYSE:BX - News) and Carlyle Group (CYL.UL), people familiar with the situation said. Less than three weeks ago, Washington Mutual ousted Chief Executive Kerry Killinger, who drove the thrift's growth as well as its expansion in subprime and other risky mortgages, and replaced him with Alan Fishman, the former chief executive of Brooklyn, New York's Independence Community Bank Corp. The transaction also appears to be a costly defeat for David Bonderman and his private equity firm TPG Inc (TPG.UL), the lead investor in a $7 billion capital raise by the thrift in April. TPG was unavailable for comment. Washington Mutual's roughly $227 billion book of real estate loans put the thrift at the top of the critical list of U.S. lenders, analysts said. More than half of this portfolio was in home equity loans and in adjustable-rate mortgages and subprime mortgages that are now considered risky. Thursday's transaction makes JPMorgan close in size to Citigroup, now the largest U.S. bank by assets. JPMorgan has surpassed Bank of America in size. That bank would become the largest U.S. bank once it completes its planned purchase of Merrill Lynch, expected in the first quarter of 2009. DIMON POUNCES The deal is the latest ambitious move by Dimon. Once a golden child at Citigroup before his mentor Sanford "Sandy" Weill engineered his ouster in 1998, Dimon has carved for himself something of a role as a Wall Street savior. Dimon joined JPMorgan in 2004 after selling his Bank One Corp to the bank for $56.9 billion, and became chief executive at the end of 2005. While results have been hurt by the credit crisis, JPMorgan has suffered less than many rivals. Some historians see parallels between him and the legendary financier John Pierpont Morgan, who ran J.P. Morgan & Co and was credited with intervening to end a banking panic in 1907. Bank of America Chief Executive Kenneth Lewis has also been credited with helping reduce damage on Wall Street with his acquisitions this year of Merrill Lynch and Countrywide Financial Corp, the nation's largest mortgage lender. Washington Mutual has a major presence in California and Florida, two of the states hardest hit by the housing crisis. It also has a big presence in the New York City area. The thrift amassed $6.3 billion of losses in the nine months ended June 30. It had also projected $19 billion of mortgage losses through 2011, but analysts said credit losses could reach as high as $30 billion. "It is surprising that it has hung on for as long as it has," said Nancy Bush, an analyst at NAB Research LLC. (Additional reporting by Paritosh Bansal, Christian Plumb and Dan Wilchins; Jessica Hall in Philadelphia; John Poirier in Washington, D.C. and Kevin Lim in Singapore; Editing by Gary Hill)