Another one bites the dust... RIP WAMU

[RandomGuy]

WaMu is largest U.S. bank failure (http://news.yahoo.com/s/nm/20080926/ts_nm/us_washingtonmutual_jpmorgan_news)

Just doing a late night news check, and ooopsies, another big bank eats it.

NEW YORK/WASHINGTON (Reuters) - Washington Mutual Inc was closed by the U.S. government in by far the largest failure of a U.S. bank, and its banking assets were sold to JPMorgan Chase & Co for $1.9 billion.

Thursday's seizure and sale is the latest historic step in U.S. government attempts to clean up a banking industry littered with toxic mortgage debt. Negotiations over a $700 billion bailout of the entire financial system stalled in Washington on Thursday.

Washington Mutual, the largest U.S. savings and loan, has been one of the lenders hardest hit by the nation's housing bust and credit crisis, and had already suffered from soaring mortgage losses.

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Adios muchachos.

[MannyIsGod]

Expect to see more if that bailout isn't done soon.

[RandomGuy]

Expect to see more if that bailout isn't done soon.

There will be more either way.

I heard an interesting bit that the bailout will potentially force more under.

Some of the CDO's (bonds backed by mortgages) are thinly traded and really hard to value are carried at overly optimistic valuations as assets on the books of a lot of insurance companies and banks.

The federal bailout will provide a very firm market valuation as the government starts setting a price for them at a rate much lower than the institution was previously claiming.

This will make a lot of reserves vanish.

[RandomGuy]

There will be more either way.

I heard an interesting bit that the bailout will potentially force more under.

Some of the CDO's (bonds backed by mortgages) are thinly traded and really hard to value are carried at overly optimistic valuations as assets on the books of a lot of insurance companies and banks.

The federal bailout will provide a very firm market valuation as the government starts setting a price for them at a rate much lower than the institution was previously claiming.

This will make a lot of reserves vanish.

This is, consequently, why I think Paulson wants to buy a lot of these assets at higher valuations than a lot of analysts seem to think is the "real" market value of such assets. The higher the price he (ok WE) pays for those assets the less reserves at these institutions take a hit.

[boutons_]

117 banks on Treasury's secret watch list, more banks to fail.

I say let the FDIC do its job, protect depositors, but INVESTORS, well "never invest(gamble) more than you can afford to lose at the investment casino", so tough shit.

If investors didn't learn their lessons watching WorldCom and Enron destroy investors, tough shit.

[DarkReign]

117 banks on Treasury's secret watch list, more banks to fail.

I say let the FDIC do its job, protect depositors, but INVESTORS, well "never invest(gamble) more than you can afford to lose at the investment casino", so tough shit.

If investors didn't learn their lessons watching WorldCom and Enron destroy investors, tough shit.

You do realize the FDIC is going broke too, yeah?

They have something like $50 billion left for this year with over $270 billion due in payments before the end of the year (im googling really hard right now for a link).

I say let this fucker burn.

[DarkReign]

FDIC is broke (http://www.bloomberg.com/apps/news?pid=20601213&sid=amZxIbcjZISU&refer=home)

[Viva Las Espuelas]

FDIC is broke (http://www.bloomberg.com/apps/news?pid=20601213&sid=amZxIbcjZISU&refer=home)
i'm glad chase bought WAMU. i wouldn't want to think would be happening right now if they didn't

[I Love Me Some Me]

i'm glad chase bought WAMU. i wouldn't want to think would be happening right now if they didn't

Here's an example of what was dangerously close to happening.

Between 9/15 and 9/24, WaMu experienced an outflow of deposits totaling close to $17 billion. Because agencies had downgraded WaMu so severely, they were incapable of producing additional capital. The OTS (Office of Thrift Supervision) shut down WaMu, and handed them over to the FDIC. WaMu had deposit obligations (customer's money) of over $188 billion. The FDIC had only $45 billion available to insure depositors. That means over $140 billion in customer cash would have just been gone...kaput...vanished into nowhere. That could have been as early as this morning...we were THAT close to a financial meltdown in this country.

[spurster]

Bailing out FDIC is lot more palatable than bailing out Wall Street speculation.