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Feds seize, sell WaMu in biggest U.S. bank failure

Officials promise a seamless transition to new owner JPMorgan.

September 26, 2008|E. Scott Reckard and Tiffany Hsu | Times Staff Writers

For JPMorgan, this is the second government-sponsored rescue. With the Federal Reserve's aid, Dimon agreed in March to absorb Wall Street's Bear Stearns Cos., the first in a series of "too big to fail" deals that have included government takeovers of mortgage giants Fannie Mae and Freddie Mac and insurer American International Group.

Bair said "a number of regulators" had prodded Washington Mutual into raising capital in March, a process that resulted in the private equity investment.

After IndyMac failed in July, "there was another liquidity situation" -- a huge outflow of deposits at WaMu -- "that revived discussions," she said.

As customers and investors became more aware of WaMu's exposure to losses, they accelerated their withdrawals and sales of the company's stock, which closed at $1.69 on Thursday, down 57 cents on the day.

Kar Chin of East Los Angeles said he withdrew $20,000 from a WaMu branch in the City of Industry late last week even though he knew the funds were FDIC-insured because they were less than $100,000. He said friends had advised him to take his money out on the possibility that he might lose access to them temporarily, so he opened an account at Wells Fargo & Co. instead.

Chin said he stood in line for more than half an hour, mostly because of other people making withdrawals, then heard the teller talking to a supervisor about customers losing faith in WaMu.

Richard Dunne, 56, a 15-year Washington Mutual customer, said Thursday he had withdrawn nearly his entire business account from the Laguna Hills branch the week before on the advice of financial advisors, even though his account did not exceed federal insurance limits.

"Any interruption would cause real problems in my life," said Dunne, who sells women's accessories.

At a WaMu office in downtown Los Angeles on Thursday evening, 33-year-old Mike Nelson was an exception to the trend of recent days: He was depositing money.

"I'm not taking all my money out and putting it in a mattress just yet," Nelson said. "It's freaky times right now, but at the same time, things always find a way to work out -- they have to."




Washington Mutual

Total assets: $307 billion*

Branches: 2,239 in 15 states, including about 700 in California

Employees: 43,198*

Headquarters: Seattle

Losses: $6.1 billion in the three quarters ending June 30


* As of June 30

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