Who's next?????

NEW YORK — JPMorgan Chase & Co. Inc. came to the rescue of Washington Mutual Inc. Thursday, buying the thrift's banking assets after WaMu was seized by the Federal Deposit Insurance Corp. in the largest failure ever of a U.S. bank. This is the second time in six months that JPMorgan Chase has taken over a major financial institution crippled by bad bets in the mortgage market.

The deal will cost JPMorgan Chase $1.9 billion, and the bank said in a statement it planned to write down WaMu's loan portfolio by approximately $31 billion. JPMorgan Chase, which acquired Bear Stearns Cos. last March, also said it would sell $8 billion in common stock to raise its capital position.

The FDIC, which insures bank deposits, said it would not have to dip into the insurance fund as a result of the seizure. There had been concerns that the fund, which took a big hit after the seizure of IndyMac Bank, could be depleted by a WaMu seizure.

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."

The government measures bank failures by an institutions's assets; Seattle-based WaMu has roughly $310 billion in assets. The previous record was the failure of Continental Illinois National Bank in 1984, with $40 billion in assets when it closed. IndyMac, seized in July, had $32 billion.

WaMu was searching for a lifeline after piling up billions of dollars in losses due to failed mortgages. WaMu has seen its stock price plummet by 87 percent this year, and it suffered a ratings downgrade by Standard & Poor's earlier this week that put it in danger of collapse.

The Bush administration's proposal for a $700 billion bailout for distressed financial institutions was believed to have given fresh impetus to a buyout and new allure to Washington Mutual. Besides JPMorgan Chase, Wells Fargo & Co., Citigroup Inc., HSBC, Spain's Banco Santander and Toronto-Dominion Bank of Canada were all mentioned as possible suitors. WaMu was also believed to be talking to private equity firms.

The FDIC was seeking a buyer will to bear a large burden of WaMu's losses, to lessen the impact on the insurance fund.

In a statement, JPMorgan Chase said it was not acquiring any senior unsecured debt, subordinated debt, and preferred stock of Washington Mutual's banks, or any assets or liabilities of the holding company, Washington Mutual Inc.

JPMorgan Chase's chief executive, Jamie Dimon, said in a conference call, said the "only negative" related to the deal was "how to handle some of these bad assets." He did not elaborate.

JPMorgan Chase said the acquisition will give it 5,400 branches in 23 states. JPMorgan Chase said it plans to close less than 10 percent of the two companies' branches; the bank has not yet decided which to close.

In March, the bank acquired the failing Bear Stearns in a deal brokered by the government. It paid $2.3 billion for the company and its stock, bringing its expenditure on both Bear Stearns and WaMu to a total of $4.2 billion.

Washington Mutual ran into trouble after it got caught up in the booming part of the mortgage business that made loans to people with bad credit, known as subprime borrowers.

Troubles 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.

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.

http://www.chron.com/disp/story.mpl/front/6023441.html

I told you WaMu was next.

NEXT UP: Wachovia.

THIS IS GETTING SCARIER BY THE MINUTE. But ehh...lets just throw more money at it! God I wish Ron Paul had a chance at taking on this problem.

WaMu been on death watch for months, I'm actual kind of impressed they lasted as long as they did.

ETSUfan1 Wrote:THIS IS GETTING SCARIER BY THE MINUTE. But ehh...lets just throw more money at it! God I wish Ron Paul had a chance at taking on this problem.

Chase got a great deal on WaMu... $1.9 billion for around $270 billion in "quality" assets (after they dump the subprime mortgages).

Plus this puts Chase in some new markets, such as Atlanta.

WMD Owl Wrote:Chase got a great deal on WaMu... $1.9 billion for around $270 billion in "quality" assets (after they dump the subprime mortgages).

Plus this puts Chase in some new markets, such as Atlanta.

Of course they got a great deal. That's how the FDIC gets these deals done.

Owl 69/70/75 Wrote:

WMD Owl Wrote:Chase got a great deal on WaMu... $1.9 billion for around $270 billion in "quality" assets (after they dump the subprime mortgages).

Plus this puts Chase in some new markets, such as Atlanta.

Of course they got a great deal. That's how the FDIC gets these deals done.

Assumption at less than 1% of value? Why have a bailout when you could have consolidation at much smaller cost? Chase is going to sell $8 billion in stock, so it looks like they might not be finished buying either.

georgia_tech_swagger Wrote:I told you WaMu was next.

NEXT UP: Wachovia.

You may be right.... Why does Citigroup want Wachovia when it isn't in very good shape either?

Citigroup (C: 20.15, +0.74, +3.81%) and Wells Fargo (WFC: 37.31, +3.19, +9.34%) were locked in a bidding war on Sunday over a possible takeover of Wachovia (WB: 10.00, -3.70, -27.00%), according to the New York Times.

The newspaper is also reporting the Federal Reserve and Treasury Department have been involved in the talks, but are resisting guaranteeing a part of the distressed bank's assets.

It is unclear whether the potential deals put the entire bank up for sale or whether it will be broken up.

Shares of the Charlotte, N.C.-based bank tumbled 27% Friday -- the day after Washington Mutual was purchased by JPMorgan (JPM: 48.24, +4.78, +10.99%). After watching the company's stock take a beating, Wachovia executives turned to the potential suitors, according to reports.

Wachovia has $400 billion in deposits and is the nation's sixth-largest U.S. bank by assets. The housing crisis has hit the bank hard and has left it with a $122 billion portfolio of option adjustable-rate mortgages.

Following Lehman Brothers’ bankruptcy filing earlier this month, Wachovia was reportedly in merger talks with Morgan Stanley (MS: 24.75, -2.35, -8.67%), but people familiar with the matter say those talks have ended.

After posting a bigger-than-expected first-quarter loss of $393 million in April, Wachovia reduced its dividend and said it would raise about $7 billion through the sale of common and convertible preferred stock.

http://www.foxbusiness.com/story/markets...ss-signal/

If Citigroup buys Wachovia THEY'RE next-next.

Unlike the WaMu deal, it looks like Citi got the FDIC to eat some of the Wachovia losses.. So what happens now to AG Edwards??

Citigroup will absorb up to $42 billion of losses from Wachovia's $312 billion loan portfolio, with the FDIC covering any remaining losses, the government agency said Monday. Citigroup also will issue $12 billion in preferred stock and warrants to the FDIC.

The deal greatly expands Citigroup's retail outlets and secures its place among the U.S. banking industry's Big Three, along with Bank of America Corp. and J.P. Morgan Chase & Co. But it comes at a cost -- Citigroup said Monday it will seek to sell $10 billion in common stock and slashed its quarterly dividend in half to 16 cents to shore up its capital position.

The agreement comes after a fevered weekend courtship in which Citigroup and Wells Fargo & Co. both were reportedly studying the books of Wachovia, which suffers from mounting losses linked to its ill-timed 2006 acquisition of mortgage lender Golden West Financial Corp.

Wachovia, like Washington Mutual Inc., which was seized by the federal government last week, was a big originator of option adjustable-rate mortgages, which offer very low introductory payments and let borrowers defer some interest payments until later years. Delinquencies and defaults on these types of mortgages have skyrocketed in recent months, causing big losses for the banks.

The FDIC asserted Monday that Wachovia did not fail, and that all depositors are protected and there will be no cost to the Deposit Insurance Fund.

Federal Reserve Chairman Ben Bernanke, in a statement Monday, said he supports the "timely actions" taken by the FDIC "which demonstrate our government's unwavering commitment to financial and economic stability."

Treasury Secretary Henry Paulson also welcomed the sale of Wachovia to Citigroup, saying it would "mitigate potential market disruptions." Paulson said he agreed with the FDIC and the Fed that a "failure of Wachovia would have posed a systemic risk" to the nation's financial system.

"As I have said before, in this period of market stress, we are committed to taking all actions necessary to protect our financial system and our economy," Paulson said.

As details of its takeover unfolded, Wachovia shares plunged 91 percent to 94 cents. The stock had closed Friday at $10, down 74 percent for the year.

Now that a deal for Wachovia is complete, the most troubled of the nation's largest financial institutions have been dealt with. However, the FDIC estimated there were 117 banks and thrifts in trouble during the second quarter, the highest level since 2003. And that number is likely to have increased during the third quarter.

With the acquisition of Wachovia, Citigroup has reclaimed its title as the biggest U.S. bank by total assets. Including Wachovia, the bank now has assets of $2.91 trillion, as of June 30. That could change, however, as Citigroup shrinks its balance sheet, a decision Chief Executive Vikram Pandit made in May to rid the bank's books of risky debt.

Just a short time ago, Citigroup was under the scrutiny of investors who worried about the possibility of its collapse given its massive exposure to mortgage-backed securities. The New York-based bank has not turned a profit for three straight quarters, and lost a total of $17.4 billion during that period after writing down its assets by about $46 billion. That's the most write-downs of any U.S. bank.

http://biz.yahoo.com/ap/080929/wachovia_....html?.v=1