Government Seizure of WaMu Increases J.P Morgan Chase Assets.
posted by Mike Clark on 9/26/2008 10:55:18 AM
In the news this morning....
In what is by far the largest bank failure in U.S. history, federal regulators seized Washington Mutual Inc. late Thursday and struck a deal to sell the bulk of its operations to J.P. Morgan Chase & Co.
I think we are all aware that it is a tough market in the U.S. right now. Stocks have fallen, lenders have continued to tighten the reins and major banks have teetered and even toppled. Banks are struggling with the same issues we as consumers are. Maybe they don't stress the increase in fuel prices, or the fact that food prices are going up, but the instability of the economy at the moment does have bearings on the ones with the money as well.
The fact that no bank was willing to buy WaMu until it failed shows how badly confidence has eroded in a banking system awash with record profits just a few years ago. Faced with deepening losses on mortgages, credit cards and other loans, big and small banks across the country are struggling with what many bank executives say is a crisis far deeper than the savings-and-loan debacle.
Banks afraid of purchasing banks? Chase bank has steadily grown over the years. You may remember the purchase/merger with Bank One a few years back. Chase recently turned down a $4.00 per share offer to purchase WaMu, hindsight, good job Chase, shares fell to $0.16 at the time of seizure.
J.P. Morgan agreed to pay $1.9 billion to the government for WaMu's banking operations and will assume the loan portfolio of the thrift, which has $307 billion in assets. The full cost to J.P. Morgan will be much higher, because it plans to write down about $31 billion of the bad loans and raise $8 billion in new capital. All WaMu depositors will have access to their cash, but holders of more than $30 billion in debt and preferred stock will likely see little if any recovery.
The deal will vault J.P. Morgan into first place in nationwide deposits and greatly expand its franchise.
references: WaMu Seized, Sold off to J.P. Morgan; Deal, Bailout Delay Rattle Investors
How Takeover of Washington Mutual Will Affect Customers
Technorati Tags:wamu takeover, chase bank, government seizure, credit card debt, mortgage
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