Regulators simultaneously brokered an emergency sale of virtually all of Washington Mutual, the nation’s largest savings and loan, to JPMorgan Chase for $1.9 billion, averting another potentially huge taxpayer bill for the rescue of a failing institution.
The move came as lawmakers reached a stalemate over the passage of a $700 billion bailout fund designed to help ailing banks, and removed one of America’s most troubled banks from the financial landscape.
Customers of WaMu, based in Seattle, are unlikely to be affected, although shareholders and some bondholders will be wiped out. WaMu account holders are guaranteed by the Federal Deposit Insurance Corporation up to $100,000, and additional deposits will be backed by JPMorgan Chase.
By taking on all of WaMu’s troubled mortgages and credit card loans, JPMorgan Chase will absorb at least $31 billion in losses that would normally have fallen to the F.D.I.C.
JPMorgan Chase, which acquired Bear Stearns only six months ago in another shotgun deal brokered by the government, is to take control Friday of all of WaMu’s deposits and bank branches, creating a nationwide retail franchise that rivals only Bank of America. But JPMorgan will also take on Washington Mutual’s big portfolio of troubled assets, and plans to shut down at least 10 percent of the combined company’s 5,400 branches in markets like New York and Chicago, where they compete. The bank also plans to raise an additional $8 billion by issuing common stock on Friday to pay for the deal.
At some point, we have to wonder just how much water JPMorgan Chase can take on before it too starts going down at the head, and how long it's going to take before JPMorgan Chase and Bank of America will be the only two banks in the country. You think your credit card interest is high now? Wait until these companies have a duopoly.
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