Today I get to say I told you so! I have been following Wall Street news quite religiously now that I'm teaching an investments course. I knew WaMu would be bought out, and I even figured it would be JP Morgan Chase. It is a surprise every single day to read the market headlines and find out what new shocking event has occurred.
And so it ends... after nearly 10 years of working for WaMu, I now am employed by JP Morgan Chase. I think it is positive change, although I am not planning on remaining there after the little guy comes. Maybe a nice severance package? Not likely, but one can hope. Here's an article from Forbes about the end of WaMu:
The U.S. government has put an end to the pain for Washington Mutual.
Federal regulators seized the teetering savings and loan Thursday and orchestrated the sale of the bulk of its assets to JPMorgan Chase (nyse:
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WIth depositors pulling their money, the Office of Thrift Supervision said the Seattle-based bank was left with insufficient liquidity to conduct business. After a bidding process conducted by the FDIC, JPMorgan acquired the deposits and assets of WaMu's banking operations for $1.9 billion. JPMorgan said the deal excluded the assets and liabilities of the holding company and its nonbank subsidiaries. It will not be subject to claims for compensation by debt holders.
In conjunction with the deal, JPMorgan said it would raise $8 billion in capital through a sale of common stock to the public.
With about 2,300 branches and $310 billion in assets, WaMu's failure is the largest banking collapse in U.S. history. The FDIC said it would not have to draw on its insurance fund as a result of the seizure.
Washington Mutual (nyse:
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people ) had been in increasingly desperate straits, racking up billions of losses as a result of its heavy exposure to subprime mortgages. When it put itself up for sale last week, a number of buyers expressed interest, including Citigroup (nyse:
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people ), as well as JPMorgan. But the government's proposed $700 billion financial sector bailout package seems to have stood in the way of a deal since it wasn’t clear how much the bailout would help WaMu.
The Wall Street Journal reported earlier on Thursday that WaMu approached Carlyle Group and Blackstone Group (nyse:
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people ) about a possible deal. The Journal said it was not clear if a deal could be completed.
Earlier in the year JPMorgan offered to buy WaMu for $8.00 per share. (See “
WaMu Defiant.”) That was a discount to the $8.75 it traded for then, but a handsome premium to the price JPMorgan is paying now.
The addition of WaMu's assets will give JPMorgan the second-largest branch network in the U.S., giving it a major presence in California, Washington State and Florida to complement its extensive footprint of its Chase network in the Northeast.
On Wednesday, Standard & Poor’s slashed WaMu's counterparty and preferred stock rating further into
junk status, which helped to bring on the end for the bank.
On Sept. 16, Washington Mutual made an unorthodox move, releasing third-quarter projections six weeks early. (See "
WaMu Rides the Rumor Express.") It said losses from
home loans could reach $19.0 billion through 2011 with $2.7 billion in
write-offs in the third quarter alone. Despite its woes, the thrift insists it has "sufficient liquidity and capital to support its operations while it returns to profitability." It claimed it had $50.0 billion of liquidity from "reliable funding sources."
