OTS Puts WaMu into Recievership; JPM Buys Assets
WaMu is now toast, forced into the waiting arms of JPM.
Here are the specifics from the Office of Thrift Supervision:
Receivership – With insufficient liquidity to meet its obligations, WMB was in an unsafe and unsound condition to transact business. OTS placed WMB into receivership on September 25, 2008. WMB was acquired today by JPMorgan Chase. The change will have no impact on the bank’s depositors or other customers. Business will proceed uninterrupted and bank branches will open on Friday morning as usual.
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See also:
WaMu Fails, Is Sold Off to J.P. Morgan
Biggest Banking Collapse in U.S. History; Government Arranges a Deal to Safeguard Huge Thrift’s Deposits Branches
ROBIN SIDEL, DAVID ENRICH and DAN FITZPATRICK
WSJ, SEPTEMBER 26, 2008
http://online.wsj.com/article/SB122238415586576687.html
JPMorgan Buys WaMu’s Deposits as Thrift Is Seized
Ari Levy and Elizabeth Hester
Bloomberg, Sept. 25 2008
http://www.bloomberg.com/apps/news?pid=20601087&sid=av8gIaGIF6EY&
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September 25th, 2008 at 10:56 pm
About time. Who’s next?
September 25th, 2008 at 11:04 pm
Who’s next?
How about the Straight Talk National Bank?
September 25th, 2008 at 11:07 pm
Looks I am going to renegotiate my mortgage with WaMu. LOL.
September 25th, 2008 at 11:07 pm
Congress has to do something to give FDIC protection to business transaction accounts greater than $100,000. There’s $2.2 trillion in uninsured deposits due to large and medium sized businesses keeping money in the checking accounts to meet payroll and expenses. I happen to own a business that keeps large deposits in the bank to meet obligations. Am I going to have to yank it out of one bank and spread it around? Hope not. But if I have to, I will. And if enough other business owners come to the same conclusion, BANK RUN!
September 25th, 2008 at 11:09 pm
So … is there a silent run on the banks, stocks, etc. going on?
September 25th, 2008 at 11:10 pm
The seizure of WaMu is definitely way overdue. But why now? Could it have anything to do with Bush, Paulson, Bernanke, and Cox wanting to create a bit more of a sense of anxiety? This will help them in their effort to cram their ridiculous plan down congress’s throats before anyone has the chance to examine it more closely. Fortunately, it now looks as if they will fail with this particular bit of dim-witted thievery.
September 25th, 2008 at 11:13 pm
too bad. if wamu could’ve held out a little longer for the paulson handout they could’ve gotten rid of all the crap they couldn’t fund, gave it over to the taxpayer, got paid handsomely for it, then do the same toxic dance again. this is what needs to happen to institutions that make bad investment decisions, they need to fail.
September 25th, 2008 at 11:25 pm
Sneaking Suspicion: I wonder if the Republicans have been made aware with utmost confidence, approving the bailout is so politically toxic, they’re looking at any excuse to get out.
I suspect the”Come to Jesus” moment (“Come to Mosses” for some) has occurred and they realize this bailout will do more damage than good.
September 25th, 2008 at 11:26 pm
WAMU was the HELOC king, everybody I know has a line and almost everybody drew it down completely in anticipation of this…
Nice handoff to JPM though, coulda been a disaster.
September 25th, 2008 at 11:26 pm
“Receivership” is correct spelling- (I before E except after C)
September 25th, 2008 at 11:46 pm
The timing of the Wamu seizure was a result of lots of people walking into their Wamu branches and withdrawing all their money…just like my buddy who did that last week.
Just like I took a lot of cash that was in a money market fund at a smaller broker out last week.
People like you and me who have lost trust in their government and want to get their hands on their cash because they’re worried they won’t be able to if they wait.
Heaven help us all.
September 25th, 2008 at 11:49 pm
Disgusted:
I’m with you; there is no such thing as coincidence where politics and big money are involved.
Seizing WM on a Thursday, THIS Thursday, instead of a Friday night smacks of more fear politics.
Tomorrow morning Congress will be perusing the headlines about the biggest bank failure in US history as they debate Hank’s Big Bank Bailout.
Hurry-up offense indeed!
These guys would make an old KGB agent like Putin blush!
September 25th, 2008 at 11:51 pm
It is NOT a credit crisis…it is a MORASS…a Much Ordered Return to Actual System-wide Sanity. Everything that is happening is 100% necessary to cleanse the system. At this point, great policy can not stop it, and poor policy will worsen it. The best hope is that policy sets the stage for a new financial oversight system that will not allow this to happen again (though I doubt we will see another bubble in our lifetimes). The system is so complex that our representatives cannot possibly understand it.
September 25th, 2008 at 11:52 pm
Stopping a Financial Crisis, the Swedish Way:
A banking system in crisis after the collapse of a housing bubble. An economy hemorrhaging jobs. A market-oriented government struggling to stem the panic. Sound familiar?
It does to Sweden. The country was so far in the hole in 1992 — after years of imprudent regulation, short-sighted economic policy and the end of its property boom — that its banking system was, for all practical purposes, insolvent.
But Sweden took a different course than the one now being proposed by the United States Treasury. And Swedish officials say there are lessons from their own nightmare that Washington may be missing.
Sweden did not just bail out its financial institutions by having the government take over the bad debts. It extracted pounds of flesh from bank shareholders before writing checks. Banks had to write down losses and issue warrants to the government.
That strategy held banks responsible and turned the government into an owner. When distressed assets were sold, the profits flowed to taxpayers, and the government was able to recoup more money later by selling its shares in the companies as well.
“If I go into a bank,” said Bo Lundgren, who was Sweden’s finance minister at the time, “I’d rather get equity so that there is some upside for the taxpayer.”
Sweden spent 4 percent of its gross domestic product, or 65 billion kronor, the equivalent of $11.7 billion at the time, or $18.3 billion in today’s dollars, to rescue ailing banks. That is slightly less, proportionate to the national economy, than the $700 billion, or roughly 5 percent of gross domestic product, that the Bush administration estimates its own move will cost in the United States.
But the final cost to Sweden ended up being less than 2 percent of its G.D.P. Some officials say they believe it was closer to zero, depending on how certain rates of return are calculated.
The tumultuous events of the last few weeks have produced a lot of tight-lipped nods in Stockholm. Mr. Lundgren even made the rounds in New York in early September, explaining what the country did in the early 1990s.
A few American commentators have proposed that the United States government extract equity from banks as a price for their rescue. But it does not seem to be under serious consideration yet in the Bush administration or Congress.
snip!
http://www.nytimes.com/2008/09/23/business/worldbusiness/23krona.html
September 25th, 2008 at 11:55 pm
That’s the sound of a stack of bad mortgages hitting the floor?
WAMU.
September 25th, 2008 at 11:56 pm
Here’s my “big picture” thoughts on the last two weeks…
There is a big problem with the system as it stands. Company stock is supposed to entail ownership. Stockholders own the company, we are told. Meanwhile, CEOs are selling their companies out from under their shareholders, sometimes making common stock worthless in the process. All this, sometimes, without even consulting the board of directors, who are supposed to represent the stockholders. Corporate governance oaths are being broken, government officials are overstepping their jurisdictions and laws are being broken without recourse. The clowns that got us in this mess and never saw it coming until it was too late are the same ones now crying that they have the cure for what ails us. It’s a farce.
The net result of all this is that stockholders are wising up to the crappy deal they have and are bailing. This will continue until the problems are fixed. Confidence in the system is going to continue to erode. Bailout packages and smoke and mirrors will not change this – only the return of rule of law and personal responsibility will. If things continue as they are, the money and markets will continue to flow overseas where they can be put to better use. Say goodbye to your USA standard of living.
September 25th, 2008 at 11:57 pm
Anyone remember the horse’s head in the Godfather? Seems like Hank and Ben just sent a message to House Republicans and their candidate.
September 26th, 2008 at 12:04 am
We’ve just had two really good examples of how to deal with financial institutions. Neither one originated with Paulson or Congress.
Warren Buffett has demonstrated how a timely capital injection into a solid, but troubled institution (Goldman Sachs) can be a win-win for both investors and the institution. His capital injection gives them the moolah to now leverage their fantastic goodwill (trade name) in the banking sector. Cost to taxpayers: $0.
The FDIC and JP Morgan have now demonstrated how to take down a huge, ailing bank. One that would normally be seen as “too big to fail” — one that’s far larger than the FDIC reserve, even. The good bank gets the good assets and deposits; the investors in the bad bank take their losses as they should. This will leave a mark but it will do wonders to reduce moral hazard.
We don’t need Paulson’s bailout, or any other perpetuation of the credit ponzi system. We need more capital infusions and more orderly takedowns of defunct institutions.
There’s enough of a deposit base out there to restore health to a goodly number of banks, without having to suck yet more credit out of the economy to fund a taxpayer bailout. And the banks’ deposits will return faster the sooner Washington gets its grubby paws off the mess and lets investors gain confidence that the rules aren’t suddenly going to be changed on them.
Washington’s role at this point should be to enhance transparency through aggressive enforcement of existing regulations, facilitate the orderly salvaging of the banks doomed to failure, and stabilize the markets by not changing the rules in the middle of the game.
September 26th, 2008 at 12:10 am
Hmm, so the country really can survive bankruptcies. Who’d a thunk it?
September 26th, 2008 at 12:11 am
Let’s see…I have accounts with Chase and WaMu…the branches I use are right across the street from eachother and there are 2 more Chase branches in the area. I’d hazard to guess that scenario is common throughout the country. The WaMu branches will close eventually, putting tons of commercial space on the market.
Back to our regular programming.
September 26th, 2008 at 12:28 am
The Drudge Report as a story on Politico that Paulson was down on one knee in front of Pelosi:
http://www.politico.com/news/stories/0908/13918.html
Does anyone else feel like we’re watching a REALLLYYYY long episode of A&E’s Intervention? “PLEASE, JUST ONE MORE CAPITAL FIX AND IT WILL ALL BE BETTER.” Unfortunately, I think this country is in for the Macro equivalent of the big sit down in the room…
September 26th, 2008 at 12:30 am
and SteveB – a to big to fail that needs to be broke up – filling those bricks and mortar fronts back up – creating y2010 trades for you all to sink your teeth into
September 26th, 2008 at 12:39 am
The US taxpayers should thank WashMu for saving us from having to bail them out. This argues for forcing those now waiting in the bail-out line to also commit hari-kiri. No? Well how about most of them ?
September 26th, 2008 at 12:41 am
Sarah Palin will not save the banking system.
Sarah Palin will not even save the snow.
Sarah Palin will save the retention prisons.
Sarah Palin will save witchcraft.
Sarah Palin will not save our reputation.
Sarah Palin will be the next Henry Kissinger.
Sarah Palin will pick our next Supreme Ct justice.
Sarah Palin will personally repopulate Alaska after the polar bears are gone.
Sarah Palin will visit Mexico to round out her foreign travel credentials.
Sarah Palin will sink McCain, O’Reilly, Rush,
Rove, and Hannity and then the rest of us.
Laura Bush is right about one thing….Sarah Palin is unprepared to be President of the United States if……
The USA has no hope with the Republican Party. They were with Bush every step of the way and now that our country is at the precipice of insolvency, they exhibit their corrupt immorality. By this time next week I plan to go to Washington State to buy a truckload of apples to sell on Rodeo Drive.
September 26th, 2008 at 12:53 am
Yes Greg…JP Morgan is now certainly too big to fail…something went wrong somehwere when companies are too big to fail. Free market capitalism should have prevented that, no? Any company that got that big in a proper fashion would not fail suddenly anyway…if they did, it would be a problem where another competitor took their place in a gradual creative destruction. It certainly could not take down the entire financial system. Too big to fail is an artifact of some kind of self dealing and cronyism.
September 26th, 2008 at 12:55 am
President Bush’s overreaction to 9/11 may have helped doom the United States financially.
First off, no one is down playing how horrible and shocking 9/11 was to the country. It truly was a time of grief and a huge wake up call to how porous our borders were and still are, but did the terrorist win in the long run.
If you’re a terrorist organization in the the late 90′s trying to figure out the best way to attack the United States, your obviously not thinking of a frontal attack on its borders. We all know strong….
http://www.mortgagebreakdown.com
September 26th, 2008 at 12:56 am
>>So … is there a silent run on the banks, stocks, etc. going on?<<
Basically, yeah. I don’t have the exact figure in front of me, but over $15Billion was taken out of WaMu by customers since Sept. 15th. I imagine the same is happening (albeit to a much smaller extent) at some other banks.
September 26th, 2008 at 12:58 am
In public they may say one thing, but in private…
China denies shunning foreign banks (Reuters):
http://www.reuters.com/article/asiaIpoNews/idUSSHA17536520080925?sp=true
September 26th, 2008 at 1:02 am
>>Seizing WM on a Thursday, THIS Thursday, instead of a Friday night smacks of more fear politics. <<
I read in one online report that they *were* planning on doing this on Friday night, but news of the JP Morgan deal leaked.
September 26th, 2008 at 1:11 am
@Steve K – overreaction, huh?
I would suggest erasing all your prior assumptions, information, news, etc. about the world, then start with a clean sheet of paper. Over a few months of watching CNBC, it became apparent to me that you must scrutinize everything that the media force feeds you. And the media is far from left wing.
September 26th, 2008 at 2:10 am
Hi Barry,
I emailed you a while ago but never heard back, can you please email me so we can discuss my proposal.
Thanks,
Andrew.
~~~
BR: I’ve been, um, a bit busy.
September 26th, 2008 at 2:36 am
Can I now cash the checks WAMU sent me in the mail today. They sent me some last week also, and the week before.
THE EXACT WORDS ON SOME OF THE LITERATURE
“Life isn’t predictable. But you can
still be in control with WAMU Credit Protection”.
Sign Up Today.
Next….
“Summer Fun left you short on cash? No problem,
just use these checks to access your credit line and get the cash you need”.
It goes ON AND ON…….
NO BAILOUT…NO GRAFT!!!!!!!
September 26th, 2008 at 2:45 am
Oh, what a day this will be. Mark it down in your calendar, folks. It’s the day that Gingrich’s “go negative early and never back down bullshit bites the dust”. I really hope some prudence comes back. I agree with those here that the Wamu thing on thursday was another scare tactic directed at congress. I hope it doesn’t work. Wall street really, really needs to be poor.
September 26th, 2008 at 3:08 am
AGG,
people are starting to see through the haze that, they know, wasn’t caused by their smoke.
it’s been one media freak-show after another this year, on top of the gas prices(that peep just know are crooked), the vapid political campaign, and Fall turning into Winter–this ~$700Bn Stick-Up job ain’t flyin’ too well. Though, it ain’t dead yet, some of the better ones are looking for some real answers.
http://dent.house.gov/PressReleases.aspx?prid=269
Our Congressmem need to hear to from all of us, it’s way things are supposed to work. They are Our Representatives to the Federal Government. We can’t abdicate Our Responsibilities to them, send them in proximity of K Street, and expect them not to get knocked-up/around. peep are just that, each One, one, and nothing alone.
September 26th, 2008 at 3:45 am
johnnyvee,
You’re either kidding or you don’t understand the mechanics of your mortgage.
Whether your mortgage merits renegotiating or not is not my point… or my business… but, if anything, you just lost much, if not all, of any negotiating leverage you might have had.
—-
Barringo,
I just listened fully through Cox’s opening statement from the first day of congressional testimony.
Two things:
-He’s correct that (in my phrasing) the SEC was not empowered to regulate the capital creation leverage element of the big investment banks. He said that missing link was a hole in which regulation was lacking.
-Second hole he’s warning about is far bigger than the first… it’s the $58 Tril in notional value of CDS derivatives floating around in the phantomsphere that is unregulated, non-standardized… and, incomprehensibly to me, t-w-i-c-e the notional size that it was in 2006.
I can manage to understand how government (legislative and administrative) could have overlooked the explosion of derivatives volume from as far back as, say, 2004 or 2005, to maybe 2006 or 2007, but for the luvvagod I can’t conceive of how they sat on their hands and did nothing after 2006, when any common i-d-i-o-t with little more than two eyes and two ears and a mouse that could find it’s way to “The Big Pic” knew that the derivatives problem was expanding exponentially.
I contend that had that simple observation been made, and that delightful industry been contained, it’s very likely that we would n-o-t have experienced the assault on the ordinary commercial paper market that fueled last week’s run on mm mfs.
It was as though the investment banks must’ve thought to themselves in 2006: “Since we now know the jig is up!… let’s just go out and ‘win one for the gipper’ before they shut us down.”
Human nature is way too predictable.
September 26th, 2008 at 3:46 am
Paulson was the leader on Wall St when all of this toxic sludge was issued.
Now he is the leader of the treasury. There is absolutely no doubt: he stole trillions from America and the world on the way up, and now he is stealing the rest on the way down.
If you explained the financial crisis to an eight year old, what is the first thing he would ask? Why is Paulson, the head of Wall Street, in charge of the treasury? Of the 6 billion people on the earth, he is the absolute worst choice.
September 26th, 2008 at 5:21 am
Paulson/Bush/Bernanke/Greenspan who knows. But trillions have been stolen and put into
boats and cars and houses and foreign banks and dynastic wealth.
Deregulation (lawlessness) is a great way to steal from the country. Easy money will always lead to bubbles. Humans are very creative and will come up with great ways to steal. Add easy money (negative FED rates) and deregulation and you will have rape, it is not if but by whom and how much.
This is going to be painful no matter what. But helping those that stole the money cover their debts with Federal money doesn’t make sense to me. But when the attitude is debts don’t matter and from a political perspective they probably don’t since usually they will blow long after the guilty are gone but this time it blew too quickly.
Even Buffett was on the band wagon to have the Federal Government buy those WEAPONS OF MASS FINANCIAL DESTRUCTION. My hero sold us out, but looks like he got in too quickly, but he is making a good return on his investment no matter what at least I hope he does.
September 26th, 2008 at 5:56 am
I will now look for silver linings (believe it or not). Please add to the list:
1) This credit MORASS is so bad, it may force Dems and Republicans to cross party lines in sheer panic and put a crimp in party politics.
2) Greenspan will finally get his comeuppance.
3) Cramer will be canceled…he is dead meat on the RIMM board on Yahoo.
September 26th, 2008 at 7:14 am
I was google’g “McCain Rothchild” yesterday … heard there was a meeting of the minds … watched some video and read some stuff … my mind registered a factoid that JP Morgan in the great depression era owned 19% of his bank, with the Red Shield owning the rest
I could be remembering wrong, I could have been fed junk … its not my job … then again what happens on my Main Street in this modern day is so manipulated by what happens on Wall Street … oh God, simpler means, please.
September 26th, 2008 at 8:14 am
another research project yesterday … and a question – is there a way to discover who Marriott has for insurance coverage or maybe they self insure?
http://en.wikipedia.org/wiki/Islamabad_Marriott_Hotel_bombing
http://finance.yahoo.com/echarts?s=MAR#symbol=MAR;range=5d
September 26th, 2008 at 8:54 am
Somebody on CNBC yesterday spent a long time explaining that the bail-out was necessary to keep interest rates from rising. Lending is dead because interest rates are too low to reflect 11% inflation and default risk. I have a LOC on commercial property with a 5.5% rate tied to prime. Why would a bank willingly lend to me at that rate? When the return is too low, credit has to disappear.
By the way, I bought that property in 1983, at a mortgage interest rate of 12.5%. The world didnt end.
September 26th, 2008 at 9:59 am
For some perspective, some guy in Texas, who’s name excapes me at the moment, put billions of dollars into WaMu late last year. It was previously thought that this guy was a savy investor, having profited greatly w/ the Bass family by buying RTC assets during the S & L crisis. Well, this guy is now toast, relative to his investment in WaMu.
Now if this guy, thought to be a savy investor, takes a 5-7 billion dollar haircut, do you think that some Bible thumping, abstinence spouting, conservative republican congressman from east nowhere understands the implications of this crisis? I think not.
September 28th, 2008 at 4:02 pm
shareholders have a right to bring shareholders derivative suits since they do have a say so no matter what happens to Washington Mutual. A class action suit will be in progress for compensaton for thoses shareholders who are being deprived of their shares. i do not know what is going to happen to the common stock holders but for sure JPMorgan Chase will not take on senior or suborinate debt or preffered shares.
Joe Swimmer