WaMu Seized by U.S., Assets Sold to JPMorgan in Record Failure
By Ari Levy and Elizabeth Hester
Sept. 26 (Bloomberg) -- Washington Mutual Inc. was seized by government regulators and its branches and assets sold to JPMorgan Chase & Co. in the biggest U.S. bank failure in history.
WaMu customers withdrew $16.7 billion since Sept. 16, leaving the Seattle-based bank ``unsound,'' the Office of Thrift Supervision said yesterday. Branches are open today and depositors have full access to their accounts, Sheila Bair, chairman of the Federal Deposit Insurance Corp., said.
The failure of WaMu, which has $188 billion in deposits, ratchets up pressure on lawmakers trying to piece together a rescue package for the nation's financial system. The government's inability yesterday to reach agreement on a bailout and the seizure of the biggest savings and loan sparked a sell- off of bank stocks, led by a 25 percent tumble in Wachovia Corp.
``All eyes are now on Wachovia,'' said Anton Schutz, president of Mendon Capital Advisors Corp. in Rochester, New York.
WaMu collapsed as its credit rating was slashed to junk and its stock price tumbled. Facing $19 billion of losses on soured mortgage loans, the lender put itself up for sale last week. WaMu fired CEO Kerry Killinger on Sept. 8 and replaced him with Alan Fishman, who was awarded a $7.5 million signing bonus and $1 million salary.
JPMorgan became the biggest U.S. bank by deposits with the deal, acquiring WaMu's branch network for $1.9 billion.
``This is a fabulous franchise,'' JPMorgan Chief Executive Officer Jamie Dimon, 52, said in an interview. ``We think we got this at a price that protects us, where if we were wrong, it still protects us.''
WaMu is the latest casualty of a financial crisis that drove Lehman Brothers Holdings Inc. and IndyMac Bancorp out of business and led to the hastily arranged rescues of Merrill Lynch & Co. and Bear Stearns Cos., which was also absorbed by JPMorgan. WaMu in March rejected a takeover offer from JPMorgan that the savings and loan valued at $4 a share.
In most bank seizures, little or nothing is left for shareholders. WaMu, down 95 percent in the past year, dropped to 16 cents on the New York Stock Exchange.
David Bonderman's TPG Inc., which led a $7 billion capital infusion for WaMu earlier this year, lost most of its initial $2 billion investment. TPG, based in Forth Worth, Texas, said in a statement yesterday it was ``dissatisfied with the loss'' and that the WaMu investment was a ``small part of assets.''