Government Seizes WaMu and Sells Some Assets
By ERIC DASH and ANDREW ROSS SORKIN
September 26, 2008
Washington Mutual, the giant lender that came to symbolize the excesses of the mortgage boom, was seized by federal regulators on Thursday night in the largest bank failure in American history.
Regulators simultaneously brokered an emergency sale of virtually all of Washington Mutual to JPMorgan Chase. The remainder of WaMu, the nation’s largest savings and loan, will be operated by the government. Shareholders and some bondholders will be wiped out. WaMu deposits are guaranteed by the Federal Deposit Insurance Corporation up to the $100,000 limit for each account. WaMu customers are unlikely to be affected.
JPMorgan Chase is to take control on Friday of all of WaMu’s 2,300 branches, which stretch from New York to California, and will oversee its big portfolio of mortgage and credit card loans. It will also acquire all of WaMu’s deposits with the sale.
For weeks, the Federal Reserve and the Treasury Department had been nervous about the fate of WaMu, among the worst-hit by the housing crisis, and pressed hard for the bank to sell itself. As panic gripped financial markets last week following the collapse of Lehman Brothers, the government stepped up its efforts, working behind the scenes and at points going behind WaMu’s back to work privately with potential bidders on a deal.
Indeed, the seizure and the deal with JPMorgan came as a shock to Washington Mutual’s board, which was kept completely in the dark: the company’s newly minted chief executive, Alan C. Fishman, was in midair, flying from New York to Seattle at the time the deal was finally brokered, according to these people.
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