Wamu-biggest Bank To Fail In Us History!

[HALEY]

If no one believes the depressing is hitting us read this, it's scary !!!

WaMu becomes biggest bank to fail in U.S. history
By The Associated Press
Friday, September 26, 2008

Buzz up!


NEW YORK -- As the debate over a $700 billion bank bailout rages on in Washington, one of the nation's largest banks - Washington Mutual Inc. - has collapsed under the weight of its enormous bad bets on the mortgage market.

The Federal Deposit Insurance Corp. seized WaMu on Thursday, and then sold the thrift's banking assets to JPMorgan Chase & Co. for $1.9 billion.

Seattle-based WaMu, which was founded in 1889, is the largest bank to fail by far in the country's history. Its $307 billion in assets eclipse the $40 billion of Continental Illinois National Bank, which failed in 1984, and the $32 billion of IndyMac, which the government seized in July.


One positive is that the sale of WaMu's assets to JPMorgan Chase prevents the thrift's collapse from depleting the FDIC's insurance fund. But that detail is likely to give only marginal solace to Americans facing tighter lending and watching their stock portfolios plunge in the wake of the nation's most momentous financial crisis since the Great Depression.

Because of WaMu's souring mortgages and other risky debt, JPMorgan plans to write down WaMu's loan portfolio by about $31 billion - a figure that could change if the government goes through with its bailout plan and JPMorgan decides to take advantage of it.

"We're in favor of what the government is doing, but we're not relying on what the government is doing. We would've done it anyway," JPMorgan's Chief Executive Jamie Dimon said in a conference call Thursday night, referring to the acquisition. Dimon said he does not know if JPMorgan will take advantage of the bailout.

WaMu is JPMorgan Chase's second acquisition this year of a major financial institution hobbled by losing bets on mortgages. In March, JPMorgan bought the investment bank Bear Stearns Cos. for about $1.4 billion, plus another $900 million in stock ahead of the deal to secure it.

JPMorgan Chase is now the second-largest bank in the United States after Bank of America Corp., which recently bought Merrill Lynch in a flurry of events that included Lehman Brothers Holdings Inc. going bankrupt and American International Group Inc., the world's largest insurer, getting taken over by the government.

JPMorgan also said Thursday it plans to sell $8 billion in common stock to raise capital.

The downfall of WaMu has been widely anticipated for some time because of the company's heavy mortgage-related losses. As investors grew nervous about the bank's health, its stock price plummeted 95 percent from a 52-week high of $36.47 to its close of $1.69 Thursday. On Wednesday, it suffered a ratings downgrade by Standard & Poor's that put it in danger of collapse.

WaMu "was under severe liquidity pressure," FDIC Chairman Sheila Bair told reporters in a conference call.

"For all depositors and other customers of Washington Mutual Bank, this is simply a combination of two banks," Bair said in a statement. "For bank customers, it will be a seamless transition. There will be no interruption in services and bank customers should expect business as usual come Friday morning."

Besides JPMorgan Chase, Wells Fargo & Co., Citigroup Inc., HSBC, Spain's Banco Santander and Toronto-Dominion Bank of Canada were also reportedly possible suitors. WaMu was believed to be talking to private equity firms as well.

The seizure by the government means shareholders' equity in WaMu was wiped out. The deal leaves private equity investors including the firm TPG Capital, which gave WaMu a cash infusion totaling $7 billion this spring, on the sidelines empty handed.

WaMu ran into trouble after it got caught up in the once-booming subprime mortgage business. Troubles then spread to other parts of WaMu's home loan portfolio, namely its "option" adjustable-rate mortgage loans. Option ARM loans offer very low introductory payments and let borrowers defer some interest payments until later years. The bank stopped originating those loans in June.

Problems in WaMu's home loan business began to surface in 2006, when the bank reported that the division lost $48 million, compared with net income of about $1 billion in 2005.

At the start of 2007, following the release of the company's annual financial report, then-CEO Kerry Killinger said the bank had prepared for a slowdown in its housing business by sharply reducing its subprime mortgage lending and servicing of loans. Alan H. Fishman, the former president and chief operating officer of Sovereign Bank and president and CEO of Independence Community Bank, replaced Killinger earlier this month.

As more borrowers became delinquent on their mortgages, WaMu worked to help troubled customers refinance their loans as a way to avoid default and foreclosure, committing $2 billion to the effort last April. But that proved to be too little, too late.

At the same time, fears of growing credit problems kept investors from purchasing debt backed by those loans, drying up a source of cash flow for banks that made subprime loans.

In December, WaMu said it would shutter its subprime lending business and reduce expenses with layoffs and a dividend cut.

The bank in July reported a $3 billion second-quarter loss - the biggest in its history - as it boosted its reserves to more than $8 billion to cover losses on bad loans. Over the last three quarters, it added $10.9 billion to its loan-loss provisions.

JPMorgan Chase said it was not acquiring any senior unsecured debt, subordinated debt, and preferred stock of WaMu's banks, or any assets or liabilities of the holding company, Washington Mutual Inc. JPMorgan also said it will not take on the lawsuits facing the holding company.

JPMorgan Chase said the acquisition will give it 5,400 branches in 23 states, and that it plans to close less than 10 percent of the two companies' branches.

The WaMu acquisition would add 50 cents per share to JPMorgan's earnings in 2009, the bank said, adding that it expects to have pretax merger costs of approximately $1.5 billion while achieving pretax savings of approximately $1.5 billion by 2010.

"This is a definite win for JPMorgan," said Sebastian Hindman, an analyst at SNL Financial, who said JPMorgan should be able to shoulder the $31 billion writedown to WaMu's portfolio.

[HALEY]

ok Ladies i had 20 people view this, no response, what does everyone think about our market today? Anyone think there is going to be another depression or what? Would like some input here. my internets been down since Saturday and no response.. come on ladies... where is everyone at?

[Gina]

I don't think we are heading for good news if Congress doesn't vote on giving the bailout money. It is a shame that greed is what brought us to this point, but like Warren Buffet said the other day, you can't fill one part of the tub with hot water and the other part with cold, its got to be a mix. We are all going to be affected by this one way or the other. So I think they should give the money.

This country has been living in sort of a fantasy world, purchasing stuff we really can't afford. Years ago our parents didn't believe in credit cards if you didn't have the money you just didn't buy it. We have become a very materialistic country. Greed has come into play here and this is why we are in this position. Next is fear and fear begets fear in this crisis.

I can talk from the real estate end people were given sub prime mortgages with no money down, no doc mortgages, interests rates only, it was crazy but the lenders allowed this, it eventually had to start crumbling down and it will snow ball into the rest of the ecomony. People losing jobs, business closing, student loans , purchasing cars etc. This bailout is to help the banks, not the people defaulting they will still lose their homes regardless.

I see it in my business it is going to be tough getting a mortgage, you will need good credit and a good downpayment. Like it was back when.. Deals are going south because of this mess. It will spiral..

I can go on and on but looks like no one wants to voice their opinions and of course this IMO.. But we are all mature people who have an opinion and should voice it..

[2tiredmom]

I"m tired of the the government bailing out all the banks. If they didn't pay their CEO's so much they might have been ok. But that's just my opinion.
I work in County government and have been seeing alot of forclosures coming in.
I live in a small community of 10,000. In July we had over 40 come in.
Not a good sign.

Go back to the 20% down. It also amazes me that the young people just starting out think they have to have the best at the beginning without having towork for it.
It's really depressing. To much GREED.

[Janet]

I just don't voice my opinion because it doesnt' do any good. I just feel like I'm whining about it and I don't want to whine, won't help, gov't won't listen anyway. The whole country, from local level all the way to the top is corrupt in both parties and really knew this would/could happen and waited.

I wanted to be happy, but everything is going downhill and no one really gives a crap anymore. Guess it's just coming down to one worrying about themselves...it's all anyone can do.

Sorry I'm so negative this evening but you all know why. Just take my stupid opinion with a grain of salt...the rain will wash it away.

[gja1000]

A friend of mine sent this along - something to think about

The Common Sense Fix

Years of bad decisions and stupid mistakes have created an economic nightmare in this country, but $700 billion in new debt is not the answer. As a tax-paying American citizen, I will not support any congressperson who votes to implement such a policy. Instead, I submit the following three- step Common Sense Plan.

I. INSURANCE
a. Insure the subprime bonds/mortgages with an underlying FHA-type insurance.
Government-insured and backed loans would have an instant market all over the
world, creating immediate and needed liquidity.

b. In order for a company to accept the government-backed insurance, they must do two things:

1. Rewrite any mortgage that is more than three months delinquent to a
6% fixed-rate mortgage

a. Roll all back payments with no late fees or legal costs into the
balance. This brings homeowners current and allows them a
chance to keep their homes.

b. Cancel all prepayment penalties to encourage refinancing or
the sale of the property to pay off the bad loan. In the event of
foreclosure or short sale, the borrower will not be held liable
for any deficit balance. FHA does this now, and that
encourages mortgage companies to go the extra mile while
working with the borrower—again limiting foreclosures and
ruined lives.

2. Cancel ALL golden parachutes of EXISTING and FUTURE CEOs and
executive team members as long as the company holds these
government-insured bonds/mortgages. This keeps underperforming
executives from being paid when they don’t do their jobs.
c. This backstop will cost less than $50 billion—a small fraction of the current proposal.

II. MARK TO MARKET
a. Remove mark to market accounting rules for two years on only subprime Tier III
bonds/mortgages. This keeps companies from being forced to artificially mark down
bonds/mortgages below the value of the underlying mortgages and real estate.
b. This move creates patience in the market and has an immediate stabilizing effect on
failing and ailing banks—and it costs the taxpayer nothing.

III. CAPITAL GAINS TAX
a. Remove the capital gains tax completely. Investors will flood the real estate and stock market in search of tax-free profits, creating tremendous—and immediate—liquidity in the markets. Again, this costs the taxpayer nothing.

b. This move will be seen as a lightning rod politically because many will say it is helping the rich. The truth is the rich will benefit, but it will be their money that stimulates the economy. This will enable all Americans to have more stable jobs and retirement investments that go up instead of down.

This is not a time for envy, and it’s not a time for politics. It’s time for all of us, as Americans, to stand up, speak out, and fix this mess.

I am just happy I can buy some stock at a really low price

[HALEY]

im glad i got some responses, see i don't believe we should bail the banks out of this problem there the ones that got "greedy", so they should bail themselves out, i totally agree with the government, and i'm also glad they put the credit crunch in effect, there giving out loans to people that can't make the payments and this is why "i believe" were in this situation in the first place, now if the stocks should crash maybe it will drive these high prices they have on everything down to what the "working people" could affort and stop making the rich richer, and give the working class people a break !

[HALEY]

The Common Sense Fix
Years of bad decisions and stupid mistakes have created an economic nightmare in this country,
but $700 billion in new debt is not the answer. As a tax-paying American citizen, I will not support
any congressperson who votes to implement such a policy. Instead, I submit the following threestep
Common Sense Plan.
I. INSURANCE
a. Insure the subprime bonds/mortgages with an underlying FHA-type insurance.
Government-insured and backed loans would have an instant market all over the
world, creating immediate and needed liquidity.
b. In order for a company to accept the government-backed insurance, they must do two
things:
1. Rewrite any mortgage that is more than three months delinquent to a
6% fixed-rate mortgage.
a. Roll all back payments with no late fees or legal costs into the
balance. This brings homeowners current and allows them a
chance to keep their homes.
b. Cancel all prepayment penalties to encourage refinancing or
the sale of the property to pay off the bad loan. In the event of
foreclosure or short sale, the borrower will not be held liable
for any deficit balance. FHA does this now, and that
encourages mortgage companies to go the extra mile while
working with the borrower—again limiting foreclosures and
ruined lives.
2. Cancel ALL golden parachutes of EXISTING and FUTURE CEOs and
executive team members as long as the company holds these
government-insured bonds/mortgages. This keeps underperforming
executives from being paid when they don’t do their jobs.
c. This backstop will cost less than $50 billion—a small fraction of the current proposal.
II. MARK TO MARKET
a. Remove mark to market accounting rules for two years on only subprime Tier III
bonds/mortgages. This keeps companies from being forced to artificially mark down
bonds/mortgages below the value of the underlying mortgages and real estate.
b. This move creates patience in the market and has an immediate stabilizing effect on
failing and ailing banks—and it costs the taxpayer nothing.
III. CAPITAL GAINS TAX
a. Remove the capital gains tax completely. Investors will flood the real estate and stock
market in search of tax-free profits, creating tremendous—and immediate—liquidity in
the markets. Again, this costs the taxpayer nothing.
b. This move will be seen as a lightning rod politically because many will say it is helping
the rich. The truth is the rich will benefit, but it will be their money that stimulates the
economy. This will enable all Americans to have more stable jobs and retirement
investments that go up instead of down.
This is not a time for envy, and it’s not a time for politics. It’s time for all of us, as Americans, to
stand up, speak out, and fix this mess.

[HALEY]

Originally Posted by gja1000

A friend of mine sent this along - something to think about

The Common Sense Fix

Years of bad decisions and stupid mistakes have created an economic nightmare in this country, but $700 billion in new debt is not the answer. As a tax-paying American citizen, I will not support any congressperson who votes to implement such a policy. Instead, I submit the following three- step Common Sense Plan.

I. INSURANCE
a. Insure the subprime bonds/mortgages with an underlying FHA-type insurance.
Government-insured and backed loans would have an instant market all over the
world, creating immediate and needed liquidity.

b. In order for a company to accept the government-backed insurance, they must do two things:

1. Rewrite any mortgage that is more than three months delinquent to a
6% fixed-rate mortgage

a. Roll all back payments with no late fees or legal costs into the
balance. This brings homeowners current and allows them a
chance to keep their homes.

b. Cancel all prepayment penalties to encourage refinancing or
the sale of the property to pay off the bad loan. In the event of
foreclosure or short sale, the borrower will not be held liable
for any deficit balance. FHA does this now, and that
encourages mortgage companies to go the extra mile while
working with the borrower—again limiting foreclosures and
ruined lives.

2. Cancel ALL golden parachutes of EXISTING and FUTURE CEOs and
executive team members as long as the company holds these
government-insured bonds/mortgages. This keeps underperforming
executives from being paid when they don’t do their jobs.
c. This backstop will cost less than $50 billion—a small fraction of the current proposal.

II. MARK TO MARKET
a. Remove mark to market accounting rules for two years on only subprime Tier III
bonds/mortgages. This keeps companies from being forced to artificially mark down
bonds/mortgages below the value of the underlying mortgages and real estate.
b. This move creates patience in the market and has an immediate stabilizing effect on
failing and ailing banks—and it costs the taxpayer nothing.

III. CAPITAL GAINS TAX
a. Remove the capital gains tax completely. Investors will flood the real estate and stock market in search of tax-free profits, creating tremendous—and immediate—liquidity in the markets. Again, this costs the taxpayer nothing.

b. This move will be seen as a lightning rod politically because many will say it is helping the rich. The truth is the rich will benefit, but it will be their money that stimulates the economy. This will enable all Americans to have more stable jobs and retirement investments that go up instead of down.

This is not a time for envy, and it’s not a time for politics. It’s time for all of us, as Americans, to stand up, speak out, and fix this mess.

Im sorry Gayle i didn't know this was the same one that i posted !!

[Ponyup]

I blame my generation. I have friends that couldn't make a house payment up & moved & got another loan for another house & thought that is okay. They have over 200,000 in credit card debt. I'm just so happy that I married a wonderful man that knew what he was doing. We buy everything with credit card, but pay it off at the end of the month. We use the credit cards money for free while our money makes interest in a saving account. He has excellent credit, I'm building mine slowly. We put 30% down on our first house....which was a small, inexpensive starter home. I don't understand how people can get loans for these giant houses they are building. My husband told me that your house payment should only be 15-20% of your monthly wage. I'm sure these houses I see are way more than that. I just don't understand why banks give these kinds of loans. It's like you're preying on people. You know quite well they can't afford those payments, but they don't care....they just want your money. I agree it was the greed of these large banks that did us in. I've never been so happy to be from a small town & how my mortgage with a small locally owned bank that actually cares about people.

[HALEY]

It's because the banks got greedy and gave out way to may loans to people that didn't have good credit with hardly no money down, and your right your total income should only be a small percentage for your house payment.
I don't believe it's totally your generations, we have guys here at work in the 50's losing there houses, believe me they have a good job and could afford there house payments, but they had to have nice new cars for there wive's to drive ( and most of there wive's don't work mind you) they needed boats, motorcycles, quads, more toys that they can't afford.. oh the list goes on. they wanted to be the Jones living next door.. we'll i think they should sell there "toys" and get out of dept. No i don't feel sorry for these guys at all. there the ones that made there mess by getting loans on top of loans and borrowing against there houses for these "toys"..

[Ponyup]

Originally Posted by HALEY

It's because the banks got greedy and gave out way to may loans to people that didn't have good credit with hardly no money down, and your right your total income should only be a small percentage for your house payment.
I don't believe it's totally your generations, we have guys here at work in the 50's losing there houses, believe me they have a good job and could afford there house payments, but they had to have nice new cars for there wive's to drive ( and most of there wive's don't work mind you) they needed boats, motorcycles, quads, more toys that they can't afford.. oh the list goes on. they wanted to be the Jones living next door.. we'll i think they should sell there "toys" and get out of dept. No i don't feel sorry for these guys at all. there the ones that made there mess by getting loans on top of loans and borrowing against there houses for these "toys"..

This sounds like our best couple friends. The guy still has student loans, but they are buying a boat. They don't even have funiture in there house & parts of it are unfinished & they are buying a boat. I just don't get. But my husband tells me that everyone has different priorities in life & we can't live other people's lives for them.

[HALEY]

I know i don't understand it either, many people don't put there priorities first!
I still live in my little house that i got for an estate sale 4 years ago, and yes i would love to have a bigger house one day, but i can't afford it now, i want at least 40,000 in my savings account for the down payment and to pay two house payments until i sell my other house.
My brother for one is totally different he borrowed twice against his house to pay off credit cards and his wife charged them all back up again, and she has to have a new vechicle every five years or she is not happy.. and yes they have toys too.
i would love to have a new truck, but i got my SUV that was within my budget and yes i got a used one.. and My husband and i both work!!!
My brother will probably be going into forclosure soon, i suggested his wife get off her butt and go get a job... boy did i get the dirty looks.. oh well there is nothing wrong with her working... I really don't understand what people are thinking when they get all these loans that they can't afford, do they thinkg they don't have to pay them back or what??? I'm just confussed, when i want to purchase something like a car i redo my budget and see if i could afford it or not... and i don't include my husbands overtime in the budget, cause ot is unpredictible.. especially in construction.

[gja1000]

Originally Posted by HALEY

... I really don't understand what people are thinking when they get all these loans that they can't afford, do they think they don't have to pay them back or what???

Yes! I'm convinced that many people KNOW they won't actually have to pay back the loans. Just listen to the commercials for debt reduction, e.g., "YES, you will only have to pay back pennies on the dollar of what you owe"!!! I hear that several times a day on both radio and TV. So, why in the world would people think they will really have to pay back the loan, when they hear that they won't. Also, anyone can (well could) get a loan, you hear those commercials too - "You CAN buy XXX even with bad credit!" I hear that too every day - so why in the world are we surprised that we are in this mess.