WaMu aftermath sale ripples through Freeland
Published 11:42 am Friday, September 26, 2008
In the largest bank failure in U.S. history, federal regulators seized Washington Mutual and struck a deal to sell the bulk of its operations to JPMorgan Chase.
The deal, that was announced in the evening hours Thursday, caused panic in the financial world and has the 43,000 employees of Washington Mutual, or WaMu, wondering about the future.
At WaMu’s Freeland branch the news of the sale did not cause a mad rush on the bank, but customers took their precautions.
Outside, Ken Kieling of Freeland admitted he stopped by the night before to withdraw some cash — just in case.
“I feel a lot better today,” he said. “The more I read and hear, the safer I feel, especially with JP Morgan taking over. I just hope they don’t close this branch.”
Tom Crites of Langley was alone when he pulled his truck into the parking lot just after 8:30 a.m. “I thought there might be a big line,” he said.
Crites has been banking with WaMu for seven years. He said that JPMorgan, Bank of America and Merrill Lynch are big players in the bailout business and he felt reassured that customers are going to be protected.
Still, he had some questions.
“I’m just going to go in and see what they have to say about all this,” he added.
At 9 a.m. doors opened as usual. Branch manager Erica Litow said that the half dozen customers in line were about normal for a weekday, but declined to comment on the bank’s problems.
The Freeland branch is the only WaMu branch in Island County, Island County Economic Development Council staff said Friday.
Federal Deposit Insurance Corporation officials stressed that the change would not have any impact on the bank’s depositors or other customers.
“For all depositors and other customers of Washington Mutual Bank, this is simply a combination of two banks,” said FDIC chairwoman Sheila Bair in a statement issued late Thursday. “For bank customers, it will be a seamless transition.”
According to experts, the Seattle-based thrift’s collapse was triggered by a wave of deposit withdrawals – customers pulled more than $16.7 billion in deposits between Sept. 15 and the announcement of the sale.
The deal with JPMorgan was brokered by the FDIC, after the Office of Thrift Supervision stepped in stepped in, once pressure on the bank intensified as market conditions worsened.
Washington Mutual specialized in providing home mortgages, credit cards and other retail lending products and services. It was hurt by the sub-prime mortgage crisis, but started changing its business strategy in 2006 to adjust to the impending changing housing market.
“The housing market downturn had a significant impact on the performance of WaMu’s mortgage portfolio and led to three straight quarters of losses totaling $6.1 billion,” said John Reich, director of Office of Thrift Supervision.
JPMorgan agreed to pay $1.9 billion to the government for WaMu’s banking operations and will assume the loan portfolio of the $307 billion thrift and total deposits of $188 billion.
The full cost to JPMorgan will be much higher as it has to write off bad loans and losses.
All WaMu customers will have access to their cash, but holders of amounts in the billion dollar realm are expected to take huge losses.
WaMu and JPMorgan spokespeople said Friday that there was no word yet on the future of local jobs and branches.
WaMu became an Office of Thrift Supervision-regulated institution in December 1988 and grew through acquisitions between 1996 and 2002 to become the largest savings association supervised by the agency.
As of June 30, WaMu had more than 43,000 employees, more than 2,200 branch offices in 15 states.
Record writer Jeff VanDerford contributed to this report.
