Bank failure hits home — literally
posted at 8:30 am on September 26, 2008 by Ed Morrissey
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Literally, the latest bank failure hit home today, although it didn’t exactly surprise me. Washington Mutual carries my mortgage, and I’ve done business with WaMu in one way or another for 15 years. Today they sank into banking history, as the government seized it and sold its assets to JP Morgan Chase:
Washington Mutual, the giant lender that came to symbolize the excesses of the mortgage boom, was seized by federal regulators on Thursday night, in what is by far the largest bank failure in American history.
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. …
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.
I can assure Hot Air readers that I didn’t cause this failure. No, really … trust me. I’ve had a fixed-rate mortgage for over ten years that WaMu bought shortly after the loan was made, and they’ve handled it without any fuss or bother. I also have a small checking account the First Mate uses, and that goes back well before our marriage, before WaMu bought Home Savings.
So, JP Morgan Chase has at least one good asset. My house. That’s a pleasant thought.
Seriously, though, the failure of one of my banks does bring this home a little more, if you’ll pardon the pun. We knew a few of the people in our branch when we lived in California. People will lose their jobs, and while depositors are protected — apparently JPMC agreed to guarantee all deposits, not just the FDIC portions — investors in WaMu will lose big, meaning other jobs will likely get lost and retirement funds will shrink even more. These people didn’t make the stupid investment decisions or get tens of thousands of dollars from Fannie Mae and Freddie Mac, but they’re going to pay a price for it anyway.
I’m sorry to see WaMu go under, but I’m happy that the federal government acted quickly to grab it before its collapse meant more taxpayer dollars for the bailout. JP Morgan Chase is getting great deals on these collapses, but they’re going to run out of money for them pretty soon, and any further failures will start costing taxpayers a lot of money, even outside of the bailout. Be prepared for a lot more pain.
Update: A couple of good points in the comments. First, this is a best-case scenario for a bank collapse: private enterprise picks up the pieces, depositors don’t get hurt, and taxpayers don’t foot the bill. Second, my house will be worth significantly less when this falls out, but I don’t expect to get upside-down on the mortgage. I had equity in this house before the CRA, and I’ll still have equity afterwards. I’m planning on staying in this house for a long time, so I don’t need to worry about sale price.
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My brother uses them.
Typhonsentra on September 26, 2008 at 8:33 AM
make that 2 good assets. I have also made every payment to WAMU on time for the last 10 years.
rightwingcollegeprof on September 26, 2008 at 8:36 AM
I think they bought alot of craptacular credit card debt from Providian a while back. That probably didn’t help.
forest on September 26, 2008 at 8:37 AM
Yes, but it is so much more important that we hear the candidates yet again on their foreign policy positions than it is for them to actually do their current jobs and work on a bailout (grumble grumble grumble)
rbj on September 26, 2008 at 8:37 AM
Does anyone know how this affects credit cards that are issued by WAMU? Although I do not bank with them I do have a credit card issued through their bank. Obviously I’m not free of my debt but can they jack up my interest rate and things of that nature?
theguardianii on September 26, 2008 at 8:38 AM
Sorry to disagree somewhat. This is exactly how a bank failure ought to go in a capitalist system. Everyone would be happy if all the losers would be bought out privately by the winners, that the depositors would keep their money, and that the equity holder would lose it all. Bravo.
JiangxiDad on September 26, 2008 at 8:39 AM
Am I the only one who finds it a little distasteful that the WSJ gave space to Bank of America CEO Ken Lewis to advocate for the bailout?
BigD on September 26, 2008 at 8:39 AM
The Company you don’t keep.
drjohn on September 26, 2008 at 8:40 AM
WHOO-HOO just went straight to UH-OH!
pilamaye on September 26, 2008 at 8:40 AM
Note also that this would’ve happened, bailout or not…
And the repercussions are further proof, I think, that the bailout won’t work and is at the very best a stopgap measure.
Skywise on September 26, 2008 at 8:40 AM
The fundamentals of our economy are strong though.
e-pirate on September 26, 2008 at 8:41 AM
Probably not, but am I the only one who finds it more than a little distasteful that the Democrats insist on having Barney Frank as a leading voice on the issue? Lollipop was a big part of the problem, add in the wacky hijinks of trying to fund ACORN and LaRaza from “the profits” and we have a case of the Donks wanting federal money to subsidize their campaigns. If ACORN gets some of “the profits” maybe we can insist the NRA or Heritage Foundation get in on the trough.
sven10077 on September 26, 2008 at 8:42 AM
LOL. Had the same thought this morning.
JiangxiDad on September 26, 2008 at 8:44 AM
They probably can per the terms of your contract. I’d just keep an eye on the bills because they might try to slip it in there without notice.
forest on September 26, 2008 at 8:49 AM
THE REAL DEAL ABOU THE BAILOUT AND WHO IT BENEFITS:
This whole thing is to benefit JP Morgan Chase!
Chase is the #1 holder of Credit Default Swaps!
Look it up…that’s who we’re bailing out!
I say intervene in order to restore confidence and liquidity in a different way…let Chase and the Jp Morgan crime dynasty burn!
SaintOlaf on September 26, 2008 at 8:51 AM
Ed, it’s more likely that WaMu didn’t own your mortgage, but rather merely (for a fee) serviced it.
Most likely, your good mortgage long ago was packaged together with lots of other mortgages, and then “securitized” and sold in “tranches” to investors who today are trying to figure out exactly what they own.
So, while I started to feel better JP Morgan Chase’s assets for a moment, it was only a moment.
JudetheFossil on September 26, 2008 at 8:52 AM
Ed, I gotta say I agree with JiangxiDad on this one – market forces at work. Adjustments being made.
I wouldn’t be surprised if there isn’t a compromise piece of legislation ready for a vote sometime before the flight/drive time from DC to Oxford MS clock runs out – and that it won’t cost 3/4 of a trillion dollars.
Big picture – I think W hit a sacrifice fly with the craptacular Paulson proposal. A deep one, that will probably end up scoring the winning runs.
Wind Rider on September 26, 2008 at 8:56 AM
The fundamentals ARE… That’s why you can’t really compare this to the depression. Economic demand for our services and goods is still up thanks to an international economy. The problem is the market liquidity isn’t there and the banks are seizing up because Sarbanes Oxley (another “quick fix” law like the Patriot Act we signed without reading) forces the banks to value their liabilities at current prices… not what their true value could be in a proper market. So all these mortgages (based on REAL houses on REAL property) are virtually worthless on the books, even though they have real asset value!
Skywise on September 26, 2008 at 8:57 AM
WaMu goes under, the DOW open -200 and Barack Is going to get in a plane and fly to a debate. I pray he does.
Amadeus on September 26, 2008 at 8:57 AM
And that is probably still overvalued by 50%, Before this is all said and done, we’ll see home prices fall to 20-40%+ over the 2000 base prices. For example, a $250k house back then will end up being worth around $300-350k, which would represent a ‘normal’ 8-10 yr appreciation.
By the way, this may be a little off topic, but if the bailout fails and the economy tanks, what is gonna happen in Mexico? They were absolutely dependent upon US for their welfare. It’s gonna explode down there.
kuhio on September 26, 2008 at 8:58 AM
Chase, BTW, just decided that my interest bearing checking account (that I’ve had for 5 years) will no longer bear interest… but I’m free to shift it to a new account that does…
Skywise on September 26, 2008 at 8:59 AM
In Los Angeles for the last two weeks I saw a dozen WA-MU commercials a day for opening new checking accounts. They were desperate for new capital.
scrubjay on September 26, 2008 at 9:00 AM
Rock and roll…let the crappy banks go under, they have not earned the right to stay in business given their managerial incompetence and nonexistent corporate governance. I look forward to more failures……this is capitalism at it’s finest.
David in ATL on September 26, 2008 at 9:00 AM
First, thanks Skywise, very well put…
Secondly, this is your government on Socialism.
That’s it………..
adamsmith on September 26, 2008 at 9:00 AM
As the incompetence and corruption unfolds, where is the accountability? It is a cancer that will not go away as long as those who created it are allowed to repeat the same thing over and over. Why has this country become lemmings who stand with hat in hand why the thieves have their way with us? Why are Chris Dodd and Barney Frank not behind bars? They strut like peacocks and do not hide their disdain for even a hint of integrity. We have become a nation of cowards.
volsense on September 26, 2008 at 9:01 AM
WaMu used to carry our mortgage too. We almost switched over to their bank to have everything in place. I think I’m gonna stay with the credit union a little while longer.
vcferlita on September 26, 2008 at 9:01 AM
Well, at least your mortgage bank wasn’t torpedoed by the likes of traitorous criminal scum, Chuck Schumer.
Schumer should hang for what he did to IndyMac. Literally too, not figuratively.
NoDonkey on September 26, 2008 at 9:03 AM
Um, same thing that is happening now. They will send their poor, uneducated, and their criminals to Mexico Norte….aka U.S.A.
HornetSting on September 26, 2008 at 9:05 AM
Hmmm you make loan payments for 10 years. So what has changed in the last couple of years that has made all these formerly solid institutions fail? Oh yeah the Democrats took over congress… but when Reps were in charge the banks were fine.
petunia on September 26, 2008 at 9:07 AM
All world stocks are tanking right now. Germany and Belgium stocks are down 4%. I had predicted yesterday that the dow would close down 5% today. I’m thinking it going to be a real bloodbath today. maybe 8% down by 4pm
Amadeus on September 26, 2008 at 9:07 AM
My wife has a WAMU credit card. I guess it’s worthless
Amadeus on September 26, 2008 at 9:09 AM
It’s a long, long, long, long story. But in 2003, Washinhgton Mutual took my house and $50,000 of my money.
I-for one–have a big ol’ smile on this morning knowing they’re on the sh!theap of history.
Typhoon on September 26, 2008 at 9:09 AM
Do most people here understand how Credit Default Swaps work?
It’s essentially like insurance..they don’t necessarily pay out any money but “hold the risk” and collect a fee.
Some one holds a loan for let’s say $10 million…they want to spread the risk, so they go to Chase and say we’ll pay you say $500,000 and you guarantee our risk.
Chase say’s sure, collects the $500k and goes their merry way…maybe they’ll sell swaps on that also maybe not.
(this whole process gets very complex and layered by the way…but the point is they do not have the money to actually guarantee the loans nor do they want to pay out…much like an insurance company)
The derivatives market is a HUGE MARKET and is COMPLETELY UNREGULATED!
The point is: Chase is the #1 holder of CDS and that is who we are bailing out.
This is not just a sub prime mortgage crisis. The actual number of foreclosed and foreclosing loans is a much smaller number.
Don’t get me wrong…I AM in favor of major government intervention in the credit markets to maintain liquidity and availability of credit…(if businesses cannot get credit lines etc. it really will be essentially the end of the world) but the way this is packaged and sold to us…it is a scam!
Look at how they picked up WaMu for $1.9 Billion…$1.9 B for WaMu is a steal!
Let Chase and the JP morgan crime dynasty burn!
SaintOlaf on September 26, 2008 at 9:15 AM
Unbelievable,all because of social engineering,
seriously,this is surreal,as your neighbor,I
stand with you guys,honestly.:)
canopfor on September 26, 2008 at 9:16 AM
While in college in 2003 and 2004, I worked as a bank teller for WAMU and they had us push the home equity line of credit and mortgages daily. We would run daily reports and then call people at their homes and/or hit up everybody who walked in the door. So, I can’t really say I’m surprised by the failure….not to mention the fact that they were growing at a completely insane rate. They were buying up other banks and opening new branches by the hundreds.
thedudesblog on September 26, 2008 at 9:17 AM
I saw this story as the lead in on the 8:00 AM Fox and Friends broadcast.
McCain’s decision to try to postpone the debates looked a little better this morning. What a price though. I’d like the McCain campaign to publicly call on Obama to debates and townhalls each and every day up until the election once whatever plan is approved.
Canadian Infidel on September 26, 2008 at 9:17 AM
I got this in my email, better than a BAILOUT:
Just a thought.
Instead of bailing out AIG to the tune of $85,000,000 ,00, I’m in favor of giving $85,000,000,000 to America in a ‘We Deserve It Dividend.’
To make the math simple, let’s assume there are 200,000,000 bonafide U.S. Citizens 18+.
Our population is about 301,000,000 +/- counting every man, woman and child. So 200,000,000 might be a fair stab at adults 18 and up.
So divide 200 million adults 18+20into $85 billion that equals $425,000.00.
My plan is to give $425,000 to every person 18+ as a ‘We Deserve It Dividend.’
Of course, it would N OT be tax free.
So let’s assume a tax rate of 30%.
Every individual 18+ has to pay $127,500.00 in taxes.
That sends $25,500,000,000 right back to Uncle Sam.
But it means that every adult 18+ has $297,500.00 in their pocket.
A husband and wife has $595,000.00.
What would you do with $297,500.00 to $595,000.00 in your family?
Pay off your mortgage “ housing crisis solved’.
Repay college loans “ what a great boost to new grads’
Put away money for college “ it’ll be there’
Save in a bank “ create money to loan to entrepreneurs’.
Buy a new car “ create jobs’
Invest in the market “20capital drives growth’
Pay for your parent’s medical insurance “ health care improves’
Enable Deadbeat Dads to come clean “ or else’
Remember t his is for every adult U S Citizen 18+ including the folks who lost their jobs at Lehman Brothers and every
other company that is cutting back. And of course, for those serving in our Armed Forces.
If we’re going to re-distribute wealth let ’s really do it…instead of trickling out a puny $1000.00 (’vote buy’ ) economic incentive that is being proposed by one of our candidates for President.
If we’re going to do an $85 billion bailout, let’s bail out every adult U S Citizen 18+!
As for AIG “ liquidate it’.
Sell off its parts.
Let American General go back to being American General.
Sell off the real estate.
Let the private s ector bargain hunters cut it up and clean it up.
Here’s my rationale. We deserve it and AIG doesn’t.
Sure it’s a crazy idea that can ‘never work.’
But can you imagine the Coast-To -Coast Block Party!
How do you spell Economic Boom?
I trust my fellow adult Americans to know how to use the $85 Billion!
‘We Deserve It Dividend’ more than I do the geniuses at AIG& nbsp;or in Washington DC .
And remember, This plan only really costs $59.5 Billion because $25.5 Billion is returned instantly in taxes to Uncle Sam.
originalpechanga on September 26, 2008 at 9:19 AM
Maybe my calculator is broken…..$85b divided by 200m equals $425.
David in ATL on September 26, 2008 at 9:23 AM
Not really a nationwide block party with $425 bucks a piece…
SaintOlaf on September 26, 2008 at 9:24 AM
This has been happening for much longer than two years.
That’s true. Initially I was with Bank United and one day found out I was now with Washington Mutual. They gave me a free debit card, so I didn’t really care.
I had no idea this might happen though. They have banks all over the country. I don’t quite understand what this means.
Esthier on September 26, 2008 at 9:24 AM
Confirmed. So much for THAT brilliant scheme.
ManlyRash on September 26, 2008 at 9:24 AM
Folks, this was not a good thing.
What we are seeing is the forced consolidation of the banking industry.
Smaller weaker banks were trying to play with the big boys, and are now being gobbled up by those who won’t lend them the money to survive.
In the end, we will have a very few, overlarge banks, who will have way too much market and political impact to either fail.
And PS, notice how no one is saying a thing about the investors, who, in good faith, put up their money in what was thought to be a safe investment, and have lost everything. Those investors are Americans, who are in the process of loosing whatever Retirement savings they had.
Romeo13 on September 26, 2008 at 9:25 AM
Financial apocalypse.
ManlyRash on September 26, 2008 at 9:26 AM
WaMu was a corrupt piece of dog s**t that was mismanaged, especially recently. My former business partner made the mistake of setting up a company account with them a few years ago… until our accountant and I slapped him across the room and ripped our account out of that POS faster than he could say “huh”?
Our accountant called this more than 2 years ago. 3/4 of their paper is dirty, their credit cards were worse and they were pulling every scam in the book to try to sucker people into accounts to fund their version of the Titanic. They should have been dragged out and shot years ago.
Nostradamianos predicts: Capital One will be soon if not next. They are dirty as hell and been hiding the fact that they are hideously behind the 8-ball for years as well with shitty scam credit cards, outrageous fees and BS account promos.
Damiano on September 26, 2008 at 9:30 AM
Yeah, Bravo. Lost $5k on WaMuin my 401k being an equity holder. Bravo.
kcluva on September 26, 2008 at 9:33 AM
O/T: President Bush will be on in 6 minutes!
canopfor on September 26, 2008 at 9:34 AM
Well, we’re missing 1/3 of that pie. We know the banks were making all kinds of funny swaps and deals, and we know who is picking up the tab. What’s missing is the accountability of the policymakers — that would be our government — who failed utterly.
At the every least you would think that someone in DC would recognize they owe the American people an apology.
BigD on September 26, 2008 at 9:36 AM
We just refinanced at our credit union. Great rate and no closing. Of course we were only refinancing less than a third of it’s value. Or should I say the value of the house then.
Cindy Munford on September 26, 2008 at 9:38 AM
Two weeks ago I had my Home Equity Line of Credit frozen due to the drop in the appraisal amount of my home. I was nowhere near maxed out on the HELOC or the amount of equity in my home, but the drop in the appriasal now has be at 100%. No worries,I wasn’t planning on using the HELOC anytime soon. It was a Plan C alternative to a financial worst case scenario.
BohicaTwentyTwo on September 26, 2008 at 9:39 AM
Some guy just called Bill Bennett’s show crowing about the half a million we’ll all get if the bailout is given to the people….scary how a dumb idea goes viral like this.
Sort of like liberalism?
hippie_chucker on September 26, 2008 at 9:40 AM
At least you’re not sugar coating it.
You seem to know a lot more about this than I do. What about Wells Fargo or CitiBank?
Esthier on September 26, 2008 at 9:45 AM
What a time to have a power outage knock my PC out for 10 days. I suppose I’m glad that I didn’t have to suffer through posts on McCain’s ugly week last week.
Going into today, at what point do we begin characterizing McCain as George Bailey and Barney Frank and Chris Dodd as Henry Potter? There may be a lot of blame to go around, but I don’t understand why McCain and Senate and House Republicans aren’t screaming to every camera within 100 yards that Frank and Dodd should have nothing to do with this legislation. To hear that Democrats are adding measures to benefit Acorn is criminal. I hope McCain has the stones to shove Obama’s face in to Acorn as one might shove a criminal’s face in to a pile of s***. Acorn is plague on our country.
BuckeyeSam on September 26, 2008 at 9:49 AM
I have investments thru them – indirectly. So I too am sad about hearing them go down.
tru2tx on September 26, 2008 at 9:54 AM
I’m now a JPMorgan customer too. Guess I’m moving up in the world.
DrSteve on September 26, 2008 at 9:57 AM
I’ll tell you who the biggest giant is here over the last year and a half. It is Sheila Bair, the director of the FDIC. She has more balls than anyone I’ve seen in government in a long time. A lot of us thought she was feeding the panic over foreclosures a year ago, but it turns out she was right. She did not hesitate to pull the trigger on IndyMac, and she made this deal for WaMu happen without even telling WaMu’s board. Of course, JPMorganChase has been circling WaMu for many months and that was no secret in the industry. But Bair deserves the credit for getting this done without costing the taxpayer a dime and saving the depositors.
rockmom on September 26, 2008 at 9:58 AM
Watch Wachovia. The WaMu lesson to shareholderes is being felt over there.
JiangxiDad on September 26, 2008 at 10:01 AM
I do understand the sentiment. We get used to familiar names. But we can’t have it both ways. If you philosophically oppose as much as possible the gov’t interfering in the private economy, and propping up businesses that it favors, you can’t simultaneously bemoan the loss of a familiar name when a more successful company comes in and puts a failing one out of business. It’s how it’s supposed to work. Winners and losers, no cost to the taxpayers.
A bank is like any other business, except it should be even easier to keep one afloat as the gov’t guarantees the deposits. Banks that fail are lousy at what they do. Frankly, you should be satisfied at this result, and not bemoan the loss.
JiangxiDad on September 26, 2008 at 10:05 AM
Sold C this morning. Got too uncomfortable with it. Took a loss.
Don’t own Wells Fargo, but it is reportedly in very good shape. The problems I’m hearing about are focused on Wachovia, Citi to an extent, someone mentioned GMAC–which I wouldn’t doubt, although they’re private so hard to get a handle on them. Also, GE’s finance arm is weighing that Co. down a lot, as if their commie CEO Immelt’s foray into liberal TV (NBC/MSNBC) wasn’t bad enough.
Man, who would have ever thought someone could destroy GE?
JiangxiDad on September 26, 2008 at 10:08 AM
Ed-
They hold the mortgage on my house, too.
But doesn’t this mean we get our houses for free? ;^)
playblu on September 26, 2008 at 10:11 AM
Why? Even though this is how it’s supposed to work that doesn’t make it a good thing.
This is more than the loss of a familiar name. Some people have just lost a lot of money that they won’t get back, and this wasn’t their fault.
And just because I don’t want the government bailing companies out, it doesn’t mean I enjoy seeing ANY company go under.
This may be necessary, but this isn’t a good time for the country. There’s nothing wrong with admitting that.
Esthier on September 26, 2008 at 10:12 AM
Thanks. I don’t have stock in either (my husband has a student loan through Wells Fargo, and I have a credit card through Citi), but I was curious. This thing with WaMu came out of the blue to me.
Esthier on September 26, 2008 at 10:14 AM
Actually, it kind of is. If they had more than $100,000 in a bank, they knew the risks.
angelat0763 on September 26, 2008 at 10:16 AM
Those people are keeping their money. I’m talking about the investors.
But even if I wasn’t, I think the idea that people who put more than 100k in a bank are taking a serious risk is a little ridiculous.
You put your money in a bank because you believe it will be safe there, not specifically because the government is backing your money but because the bank is.
Esthier on September 26, 2008 at 10:22 AM
Bhoo Hoo!
YYZ on September 26, 2008 at 10:34 AM
Good riddance, WAMU. You deserve your misery, you’ve certainly inflicted enough of it on this former customer.
Fishoutofwater on September 26, 2008 at 10:35 AM
The survival of stronger companies makes the economy better, and provides more secure jobs. The reconstituted WaMu under Chase will be stronger. No one but equity and debt holders lost money–as they should. I watched WaMu for months and months thinking about whether to buy in. Even at 1.67 I couldn’t pull the trigger because I didn’t want to lose my money. So many others there (at the WaMu chatroom at Yahoo) were convinced the bank was too important to fail, and the gov’t would have to bail it out. They were banking (forgive the pun) on gov’t assistance–not on the sound fundamentals of WaMu. Depositors on the other hand shouldn’t overlook FDIC limits. Personal responsibility! Employees–Chase bought it for it’s huge presence on the W. Coast and huge deposit base. Most of those employees aren’t going anywhere.
Btw, on another note, different accounting rules, and some other solution could have been worked out, and there are some add’l WaMu’s lurking out there right now which may end up being “saved” by the taxpayer.
JiangxiDad on September 26, 2008 at 10:42 AM
Yeah, but SMELL isn’t EVERYTHING, ya’ know.
My collie says:
**sigh** No more rodeo grandmas, I guess. I’ll miss that about WAMU.
CyberCipher on September 26, 2008 at 10:42 AM
Sorry to hear that Ed.
Has ANYONE heard anything about National City Bank?
They’ve got my money. I’d like to know what’s going on.
LibertarianConservative on September 26, 2008 at 10:43 AM
You have a very peculiar notion of what a bank is. It is merely a business, like a bakery. Sell stale bread, cheat your customers, overcharge, undercharge, be a bad businessperson, and you fail. A bank is not a big safe vault where your actual cash is stored.
I say this with all due respect, as I read your other comments and enjoy them.
JiangxiDad on September 26, 2008 at 10:45 AM
FoxNews reported this AM (on TV) that there was an electronic “run” on WAMU last week. People were transferring their funds out of the bank electronically. Once a run like that occurs, it’s over.
CyberCipher on September 26, 2008 at 10:46 AM
Many moons ago, in a former life, I was a young Wall Streete working in a fancy schmancy place moving (at that time) millions of dollars /day around at the push of a button. I can’t recall knowing anyone who had any notion of the risks involved in what they were doing. I’m not saying it was too risky, I’m saying people simply didn’t know.
My bank, a venerable old institution, went bye-bye, as it should have.
JiangxiDad on September 26, 2008 at 10:48 AM
So JP Morgan is now purchasing assets for pennies. Just like old times! How did they purchase banking assets of over $300 billion (plus another $188 billion in deposits) for a meager $1.9 billion? $1.9 billlion in exchange for $300 billion in assets??
Why wasn’t there an auction of sorts?
And JP Morgan is no heroic rescuer. Go do some research. In the early 1900s, JP Morgan himself was one of the masterminds behind establishing the Federal Reserve, and they likely have a seat on that board.
That same Federal Reserve that is asking us taxpayers to buy up all the worthless assets/liabilities in the economy.
But, this same bank is jumping all over the better deals before our tax dollars can?
Does anyone know of a country that isn’t currently managed and owned by a small handful of rich bankers?
angelat0763 on September 26, 2008 at 10:50 AM
Many moons ago, I too occupied a place on a trading desk. But the firm I worked for wasn’t stupid enough to invest in mortgage backed securities, and are currently well equipped to handle any crisis the market can throw at them.
It makes no sense to bail out losers when there are already winners positioned to take over.
angelat0763 on September 26, 2008 at 10:54 AM
As a non-insider, but someone who has been watching this develop for a long time, I can say that no one seemed to be beating down the doors to buy wamu. WaMu even hired Goldman to find them a suitor, went hat in hand around town, up to Toronto, all over. Morgan/Chase had the money and clout to pull it off. They won’t be around forever either.
Why are we getting mad when capitalism doesn’t work, and also getting mad when it does? Maybe Chase was able to get a good deal, and Buffett too btw at Goldman, because they’re better at what they do.
How do you pick your doctor? From a fairness directory?
JiangxiDad on September 26, 2008 at 10:54 AM
Problem on the horizon is bank consolidation.
AIG was bailed because it was too big to fail… do you think the FED will now allow Chase to fail? or BofA?
Add in that very soon, we will be down to a VERY few brokerage houses, or places for a citizen to invest money, and we will end up with a virutal stranglehold on the financial sector run by a very few HUGE companies…
Under normal times, these deals would be scrutinized much more closely…
AMERICAN investors are the ones loosing here, as their stockes and investments go to zero… as these companies essentialy go away.
Romeo13 on September 26, 2008 at 10:56 AM
That is precisely my point. Why are people complaining about it?
JiangxiDad on September 26, 2008 at 10:56 AM
If investors lost money on an investment, whose fault was it if not their own?
DarkCurrent on September 26, 2008 at 10:57 AM
So, demand for mortgages (credit) went up. But Greenspan and his successor did not allow price (interest rates) to rise.
Price controls cause shortages. Economics 101.
angelat0763 on September 26, 2008 at 10:58 AM
Good points. Capitalism won’t work without sound regulation. That’s the whole point of the brouhaha over Fannie, community lending laws, etc. Gov’t can facilitate the wheels of business, or destroy it.
JiangxiDad on September 26, 2008 at 10:58 AM
If you read the LA Times, WaMu would probably have weathered this — had there not been a run on the bank.
I’m going to watch “It’s a Wonderful Life” tonight to figure out again where my money goes…
Mr. Potter won this one, with the aid of all those little folk who have mortgages with WaMu and yet wouldn’t leave well enough alone. Hopefully they’ll like their new banker.
unclesmrgol on September 26, 2008 at 11:02 AM
I just don’t like what I’m seeing…
shooter on September 26, 2008 at 11:02 AM
Welcome to the Old Boy’s Network. There’s but one solution to the problem. Vote them ALL out of office, institute term limits. Short of that, this insane BS will go on ad infinitem.
fogw on September 26, 2008 at 11:03 AM
Because as long as the Federal Reserve is involved, it isn’t a free capitalist market.
JP Morgan has clear conflict of interest at this point. (Actually, they always do, but that’s another topic.)
They are very good at what they do, which is make money off poor suckers like us.
If the deal had been between 2 banks, I’d be ok with it. But the way I understand it is that the FDIC moved and and said “Here’s your deal!” Those are mafia style tactics.
angelat0763 on September 26, 2008 at 11:03 AM
Exactly!
Mr PotterJP Morgan isn’t selling. They’re buying.angelat0763 on September 26, 2008 at 11:05 AM
Why not?
angelat0763 on September 26, 2008 at 11:06 AM
That may be true, but any failing business would have not failed if the customers kept using it. What is the point?
JiangxiDad on September 26, 2008 at 11:06 AM
They’re my bank too.
Heck, my grandmother worked for Boeing and was one of the first customers when WaMu started up.
A very sad thing. I’m glad it worked out so well, I admit I was a little worried and so had withdrawn enough cash to cover my rent and utilities for next month, just in case. (I didn’t really expect any problems, but figured I’d best make preparations).
Sackett on September 26, 2008 at 11:11 AM
And please note that I view my action as being loyal to WaMu in that I did not withdraw my entire savings, but only an extra $400 to make sure I didn’t get into any real trouble.
Sackett on September 26, 2008 at 11:13 AM
Another commenter, Rockmom I think, said the same. Would be curious to find out exactly how this played out. Thanks
JiangxiDad on September 26, 2008 at 11:14 AM
I just got an email solicitation from WaMU entitled “WaMu News | The holidays start today”
I so love irony.
Pablo on September 26, 2008 at 11:15 AM
I heard this guy, Todd Rooker on KQRS yesterday, and he made so much sense about credit in a few minutes that i was impressed. I’d heard some of it before, but anyone looking for common sense ideas about the financial mess, check out:
http://www.92kqrs.com/goout.asp?u=http://homebridge.us/
and of course, if you like entertaining radio, d/l the KQRS morning show.
Doug on September 26, 2008 at 11:23 AM
WAIT A SEC!!!
WaMu was SEIZED by the government, and then SOLD?
HUH? This is NOT Capitalism at work, this is the government deciding winners and loosers.
Wow, they are not even really PRETENDING we are a Free Market economy any longer…
SEIZED then SOLD! WOW!
Romeo13 on September 26, 2008 at 11:30 AM
When the details emerge, which they absolutely will, you find that WM went out of business because it deserved to.
When companies go out of business they are are rarely innocent victims.
The market is a cruel teacher.
patrick neid on September 26, 2008 at 11:49 AM
I don’t know the exact enforcement powers of the Office of Thrift Supervision, but they exist, and for good reasons.
JiangxiDad on September 26, 2008 at 11:52 AM
No more WaMu free checks?
eeyore on September 26, 2008 at 11:56 AM
The point is that WaMu didn’t die of self-inflicted wounds, it was killed. Someone at FDIC made a judgement, probably with a little help from JPMorgan, and the shareholders at WaMu are stripped of their assets. The run on the bank was caused by all the press about the possibility of WaMu failing — and who generated all that press?
[FYI, I am not a WaMu shareholder, my mortgage is with them, and that mortgage is not about to disappear. I would have bought it for 2cents on the dollar like JPMorgan did, but I wasn't offered the chance. None of us will be.]
Something stinks like a dead fish here, and it isn’t John McCain, no matter what Obama says.
unclesmrgol on September 26, 2008 at 12:13 PM
I need some advice. I live in an apartment that I like, and I’ve got probably $80,000 in cash, money markets, etc.
Should I consider shopping for a bargain house?
Or, should I just start moving my investments to S/T Yen/Euro currency since the dollar will continue its slide? In other words, protect against USD but with liquidity still.
I’m thinking bagging a bargain house might be in my future and then sell it after 10 years and use it as a base for my traveling contractor work.
Sapwolf on September 26, 2008 at 12:39 PM
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