Washington Mutual closed by regulators
Washington Mutual (WaMu) has been closed making it the largest failure of a US bank. WaMu’s assets have been sold to banking giant, JPMorgan Chase, for $1.9bn (£1 billion).
WaMu was closed by the Federal Office of Thrift Supervision (OTS), and the Federal Deposit Insurance Corp (FDIC) has been appointed receiver.
$16.7 billion of deposits had been withdrawn in the last 10 days alone and the OTS stepped in to close to the bank after fears it would run out of cash.
However, regulators have said that it is business as usual today despite the change of ownership.
According to Stella Blair, chairman of the Federal Deposit Insurance Agency (FDIA), it will be a smooth transition and customers will be unaffected.
JPMorgan Chase bought Bear Stearns in March, making WaMu its second major acquisition this year.
WaMu was one of the lenders worst-hit by the collapse of the US housing market and rising mortgage defaults and was believed to be in an unsafe and unsound condition to conduct business, as it only had approximately $307 billion of assets but only about $188 billion of deposits, according to the OTS.
Earlier this month, WaMu parted ways with its chief executive Kerry Killinger, who was held responsible for the bank’s expansion into sub-prime and other risky lending.
Commenting on the deal, Jamie Dimon, chairman of JPMorgan Chase, said the deal makes excellent strategic sense for our company and our shareholders.
WaMu’s collapse is the latest in a series of events that have had repercussions on the banking system worldwide.
The events of the last two weeks have seen the collapse of Wall Street giant, Lehman Brothers, the rescue of US insurance giant AIG, Bank of America’s takeover of Merrill Lynch and in the UK, Lloyds TSB’s takeover of HBOS.
Meanwhile, in the last six months, there has been the collapse of Wall Street bank Bear Stearns and the Government takeovers of mortgage companies Fannie Mae and Freddie Mac.