FDIC: WaMu the 'Largest Bank Failure Ever' - KSWO, Lawton, OK- Wichita Falls, TX: News, Weather, Sports. ABC, 24/7, Telemundo -

FDIC: WaMu the 'Largest Bank Failure Ever'

JPMorgan Chase & Co., the firm that snapped up Bear Stearns after its collapse, has picked up another bargain.

The nation's third-largest financial services firm has bought the functional assets of Washington Mutual, the nation's largest savings and loan, for $1.9 billion after the federal government shut down the bank this evening and held a quick auction.

"The change will have no impact on the bank's depositors or other customers," according to a government press release. "Business will proceed uninterrupted and bank branches will open on Friday morning as usual."

JP Morgan said that the Washington Mutual name will continue for customers, though now a part of JP Morgan Chase. After the combination, 42 percent of American households will now be within 3 miles of a Chase retail bank, which includes Washington Mutual branches.

Analysts believe the acquisition will grow JPMorgan's retail operations into a behemoth with more than 5,400 retail branches and $644 billion in deposits after the two banks are integrated.

The failure of Washington Mutual is not only the largest on record, it dwarfs the previous record set over 24 years ago when Continental Illinois was shut down. Washington Mutual had $307 billion in assets compared to Continental's $40 billion (or $67.7 billion in 2008 dollars).

"WaMu is a very large institution and its resolutions could have posed significant challenges without a ready buyer," said FDIC chairwoman Sheila Bair.

The deal has been in the works for a while. With the aid of federal regulators, the massive thrift was searching for a suitor after its large mortgage assets began to sour and consumers started withdrawing money at an astounding pace.

WaMu had been added to the FDIC's watch list of banks in trouble sometime in the past three months. The last time the FDIC publicly disclosed the number of banks on the list was in June. At that time, there were 117 banks on the watch list.

Washington Mutual's federal regulator, the Office of Thrift Supervision, said that in the 10 days prior to the acquisition, customers had taken some $17 billion out of the bank. That's a little less than 10 percent of its total deposits.

"With insufficient liquidity to meet its obligations, WaMu was in an unsafe and unsound condition to transact business," revealed its federal regulators in a post-deal press release.

Had the Seattle-based bank -- with some $300 billion in total assets -- collapsed with no takeover, it would have strained the resources of the FDIC, the Federal Reserve and the Office of Thrift Supervision with the largest bank failure in U.S. history.

For weeks, the stock market has been betting that Washington Mutual was on the edge of either catastrophe or fire sale. Its shares had fallen 95 percent in the past year. In after-hours trading this evening, a share, which last September was trading for $35.40, had fallen to as little as $0.45.

Analysts believe WaMu's exposure to some of the nation's most troubled housing markets -- half its mortgage portfolio was in California, where home values have dropped far and fast -- would have forced it to raise another $2 to $11 billion in order to remain solvent during the current crisis. This was after getting a hefty $5 billion boost from investment group TPG in April.

JPMorgan Chase had actually approached Washington Mutual at the time of the TPG investment about an acquisition, but had been rebuffed by management.

Bair concluded a late night conference call by saying, "This is the big one that everyone was worried about. I was worried about it and I think it's a very positive story today that was resolved successfully without taxpayer cost, without cost to the insurance fund, and all depositors insured and uninsured are protected."

About Washington Mutual:

Washington Mutual (WaMu), the largest savings and loan in the United States, offers traditional consumer and commercial banking services through its retail banking group. It also offers credit cards, commercial real estate financing, and home loans through about 2,260 bank branches in the West, New York, and Connecticut, as well as 500-or-so loan and administrative offices nationwide. WaMu was once one of the largest originators and servicers of residential mortgages in the U.S., in part through subprime subsidiary Long Beach Mortgage. However, the bank exited the subprime business in 2007 in light of the 2006-2007 housing bust and subsequent epidemic of loan defaults.

About JPMorgan Chase:

The No. 3 financial services firm in the U.S. behind Citigroup and Bank of America is keen on its retail operations, with more than 3,000 bank branches and growing, and is also among the nation's top mortgage lenders, automobile loan writers, and credit card issuers. It also boasts formidable investment banking and asset management operations. The company's subsidiaries include the prestigious JPMorgan Private Bank and institutional investment manager JPMorgan Asset Management, which has $1.6 trillion in assets under management. In 2008, JPMorgan Chase bought Bear Stearns.

By DANIEL ARNALL and CHARLES HERMAN Copyright © 2008 ABCNews Internet Ventures

  • Local NewsNewsMore>>

  • Truck crashes into store, misses woman and child, caught on camera

    Truck crashes into store, misses woman and child, caught on camera

    Friday, July 28 2017 6:19 AM EDT2017-07-28 10:19:35 GMT
    Friday, July 28 2017 6:19 AM EDT2017-07-28 10:19:35 GMT

    A handful of people were in the danger zone as a box truck attempted to park in front of a 99-cent store in New York.

    A handful of people were in the danger zone as a box truck attempted to park in front of a 99-cent store in New York.

  • Russia sanctions bill gets heavy support, heads to Trump

    Russia sanctions bill gets heavy support, heads to Trump

    Friday, July 28 2017 3:59 AM EDT2017-07-28 07:59:30 GMT
    Friday, July 28 2017 5:29 AM EDT2017-07-28 09:29:25 GMT

    The Senate's decisive vote to approve a new package of stiff financial sanctions against Russia, Iran and North Korea sends the popular bill to President Donald Trump, who will be under pressure to sign it after weeks of intense negotiations.

    The Senate's decisive vote to approve a new package of stiff financial sanctions against Russia, Iran and North Korea sends the popular bill to President Donald Trump, who will be under pressure to sign it after weeks of intense negotiations.

  • Pentagon, border wall covered in $788B House spending bill

    Pentagon, border wall covered in $788B House spending bill

    Thursday, July 27 2017 12:48 PM EDT2017-07-27 16:48:59 GMT
    Friday, July 28 2017 4:40 AM EDT2017-07-28 08:40:19 GMT
    The House passed a $788 billion spending bill Thursday that combines a $1.6 billion down payment for President Donald Trump's controversial border wall with Mexico with a whopping budget increase for the Pentagon. (Source: CNN)The House passed a $788 billion spending bill Thursday that combines a $1.6 billion down payment for President Donald Trump's controversial border wall with Mexico with a whopping budget increase for the Pentagon. (Source: CNN)

    The GOP-controlled House is plowing ahead on legislation to give the Pentagon a massive spending boost and deliver a $1.6 billion down payment for President Donald Trump's oft-promised wall along the U.S.-Mexico...

    The GOP-controlled House is plowing ahead on legislation to give the Pentagon a massive spending boost and deliver a $1.6 billion down payment for President Donald Trump's oft-promised wall along the U.S.-Mexico border.

Powered by Frankly