WaMu Noooo!!

DAMN, my bank got pwned!! (literally AND figuratively)

These are some tough times we're all going through, will it ever let up?

- jv



taken from CNN.com




A road to collapse

WaMu had been one of the most hard-hit banks during the financial crisis after it bet big, like many of its competitors, on the strength of the housing market -- only to see its fortunes sour as housing prices fell.

Following several ratings agency downgrades this week and a freefall in the company's stock, many analysts were speculating that the endgame for the embattled savings and loan was imminent.

Those fears sent WaMu (WM, Fortune 500) shares 25% lower in Thursday trading. Shares of the company fell another 73% in after-hours following the announcement.

In a press conference held late Thursday, Bair said WaMu was under "severe" liquidity pressure. As a result, its fate needed to be addressed this week, even as Congress and the White House attempted to hash out a bank bailout plan.

Bair added that the company was on the FDIC's latest so-called "problem bank" list for the third quarter, which has yet to be published.

All told, Bair said four banks made bids for WaMu but JPMorgan Chase ultimately won out when the auction was held Wednesday. Several other large institutions, including Wells Fargo (WFC, Fortune 500), Citigroup (C, Fortune 500) and HSBC (HBC), were poring over the company's books, according to news reports last week.

JPMorgan Chase won because they were "the highest bid and the lowest cost resolution," Bair said.

"It was our cheapest option," she said.

Part of the $307 billion in assets that JPMorgan Chase will absorb are WaMu's toxic subprime and option-ARM mortgages. JPMorgan Chase said it would recognize projected losses on the loan portfolio upfront by marking down the value of the loans by a whopping $31 billion.

Quite possibly the biggest losers in Thursday's deal are WaMu's stock and debt holders, who were effectively wiped out.

Among that group was the private equity giant TPG, which was part of a consortium of investors that acquired a stake in WaMu for $7 billion in April.

JPMorgan Chase reportedly had made a previous bid for WaMu around that time for about $8 a share which was snubbed by WaMu, according to news reports at the time.

Tough times for banks

The fall of WaMu is the latest turn in a dizzying two weeks that have seen the bankruptcy of Lehman Brothers, the acquisition of Merrill Lynch by Bank of America (BAC, Fortune 500) and the near collapse of insurance giant AIG (AIG, Fortune 500).

The widening credit crisis has prompted President Bush to seek from Congress extraordinary authority to spend as much a $700 billion to bail out the nation's financial system by purchasing toxic assets from banks.

President Bush, in a televised address on Wednesday night, said the nation is in the middle of a "serious financial crisis" that threatens the economy. "The market is not functioning properly," Bush said. "There is a widespread loss of confidence. America could slip into a financial panic."

Regulators acknowledged they were encouraged to get a deal done but JPMorgan Chase's Dimon stressed to investors that a potential bailout by the government was not a factor.