Read some absolutely shocking news in the Wall Street Journal today. WaMu Is Seized, Sold Off to J.P. Morgan, In Largest Failure in U.S. Banking History.
US Banking History. Imagine this. US is not only floudering, but sinking to unknown depths. Everyday there is some or the other bombshell.
The collapse of the Seattle thrift, which was triggered by a wave of deposit withdrawals, marks a new low point in the country’s financial crisis. But the deal, as constructed by the Federal Deposit Insurance Corp., could hold some glimmers of hope for the beleaguered banking system because it averts any hit to the bank-insurance fund.
Instead, J.P. Morgan agreed to pay $1.9 billion to the government for WaMu’s banking operations and will assume the loan portfolio of the thrift, which has $307 billion in assets. The full cost to J.P. Morgan will be much higher, because it plans to write down about $31 billion of the bad loans and raise $8 billion in new capital. All WaMu depositors will have access to their cash, but holders of more than $30 billion in debt and preferred stock will likely see little if any recovery.
Perhaps the after effects and real damage will be known only in the coming days. What this incident will trigger will only be seen in the coming days but the prospects look dark ahead.