Washington Mutual Goes Down
Washington Mutual failed last night. Luckily, though, even as the FDIC took over the ailing savings and loan, JP Morgan was there to buy it. So FDIC insurance payouts aren’t needed. National Mortgage News reports on the largest bank failure in history:
The S&L is the nation’s fifth largest residential servicer with $600 billion in housing receivables. It is also the nation’s largest S&L with $307 billion in assets. “WaMu’s balance sheet and the payment paid by JPMorgan Chase allowed a transaction in which neither the uninsured depositors nor the insurance fund absorbed any losses,” said FDIC chairwoman Sheila Bair.
Also, it is important to note that WaMu will be largely unaffected. So don’t panic. Your money is safe and your banking will go forward as usual. Cash Money Life offers this about WaMu customers:
This deal combines the operations of two banks and most customers should be completely unaffected by this deal. Friday morning should be the same as any other day and customers should still be able to access funds and maintain their normal banking privileges. Customers should not panic as the only thing really happening is a change on the letterhead on their statements.
The way this has fallen out, though, makes for an interesting commentary on the state of things. In his speech the other night, President Bush said that the markets aren’t “working properly.” Apparently, though, they are.
See, WaMu had plenty of fundamental value. The risk was worth taking for JP Morgan. So JP Morgan bought the company at a good rate. The problem with the government buying the assets that everyone knows are bad is this: Who will buy them later? The President asserts that the government can make money when things return to “normal,” but in a normal market, no one wants to invest in something that they know has poor value.
Indeed, even though I am not huge on “free market” as most peopl think of it, I do think it’s working. After all, the investments that are bringing Wall Street down were over-valued, their status was obscured and they were over-leveraged. In a properly function free market, these types of investments should be going down hard. And they are.
Tags: free market, Washington Mutual, home mortgage loan, WaMu,
JP Morgan, bank failure, mortgage lenders
September 26th, 2008 at 11:52 am
[…] drama on Wall Street continues. Washington Mutual has gone down, taken over by the FDIC and promptly sold to JP Morgan. And the $700 billion bailout of Wall Street […]