Biggest Bank to Fail in US History
Tuesday, September 30, 2008 9:07
The Seattle-based Washington Mutual Inc. (WaMu) was founded in 1889. It was one of the nation’s largest banks.
Now, it become the largest bank to fail by far in US history after it collapsed under the weight of its enormous bad bets on the mortgage market, as the debate over a $700 billion bank bailout rages on in Washington. The downfall of WaMu has been widely anticipated for a while due to its heavy mortgage-related losses. On Thursday, the FDIC seized the bank of WaMu and then sold its assets to JPMorgan Chase & Co., which is now the second-largest bank in the US after Bank of America Corp., at the price of $1.9 billion. One good point of selling WaMu’s assets to JPMorgan Chase is that it prevents the thrift’s collapse from depleting the insurance fund of FDIC. Due to the souring mortgages and other risky debt of WaMu, JPMorgan plans to write down its loan portfolio by about $31 billion. This figure could change if the government goes through with its bailout plan and JPMorgan decides to take some advantage of it.
Actually, the purchase of WaMu’s asset is JPMorgan’s second acquisition of the US major financial institutions, which are hobbled by losing bets on mortgages. JPMorgan’s buying of the investment bank Bear Stearns Cos. for about $1.4 billion, plus another $900 million in stock in March, is its first approach.
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