Thursday, September 25, 2008

FDIC Seizes WaMu, JP Morgan to Buy Assets

*WM shares are down 73% after-hours*



It was announced today, after-hours, that the FDIC is taking control of Washington Mutual (WM) and selling its deposits as well a number of branches to JP Morgan for $1.9 billion.

Losing $6.3 billion in the last three quarters and getting cut to "junk" status didn't give WM many options to choose from. $19 billion in losses is projected through 2011, but some say the number could be as high as $30 billion.

Currently, WM has approximately $309.7 billion in assets, $227 billion in real estate loans and $181.9 billion in customer deposits. Additionally, there are 2,239 branches and 43,198 employees who work at WM. This acquisition now makes JP Morgan nearly similar in size with Citigroup.

We should see an Indymac-related type of run tomorrow at Washington Mutual retail banking centers. If I had money at WaMu, that's what I would do, 6:00AM, just to get in line first.


10 Largest bank failures in U.S. History:

1. Continental Illinois National Bank and Trust, Chicago (1984)
Total assets: $40.0 billion

2. First Republic Bank, Dallas (1988)
Total assets: $32.5 billion

3. IndyMac Bank, Pasadena, Calif. (2008)
Total assets: $32 billion

4. American S&LA, Stockton, Calif. (1988)
Total assets: $30.2 billion

5. Bank of New England, Boston (1991)
Total assets: $21.7 billion

6. MCorp, Dallas (1989)
Total assets: $18.5 billion

7. Gibraltar Savings, Simi Valley, Calif. (1989)
Total assets: $15.1 billion

8. First City Bancorporation, Houston (1988)
Total assets: $13.0 billion

9. Homefed Bank, San Diego (1992)
Total assets: $12.2 billion

10. Southeast Bank, Miami (1991)
Total assets: $11.0 billion

THIS MAKES WM'S FAILURE ALMOST 8X LARGER THAN THE LARGEST BANK FAILURE IN HISTORY AND LARGER THAN ALL TOP 10 BANKS COMBINED!

4 comments:

djplastik said...

Sup John. This WM news is the uncertainty that's going to fuel the gold trade imo. I bought AUY and EGO at the close today because they're still holding above their ema's. The risk vs reward of holding was worth it. The possible reverse h&s didn't seem likely with the strength I was seeing there. I think gold stocks will run next week. Just my 2 cents for what it's worth.

John C. Lee said...

I think you're going to kill it today. There's no doubt in my mind that people are going to flee to safety. T

he largest bank failure in the U.S. is enough reason for people to buy more gold.

djplastik said...

Jumped in too early, but possible bull flag still in place. Strange action today with the morning spike and then coninued sell off into the close. Seems like some manipulation to me to hold down upward pressure. Bailout or not, gold stocks will run in the near term imo.

John C. Lee said...

you were good at the open, but the market usually fills on on gap down days of 1% or more.

The U.S. Mint suspended the sale of another one of coins, the American Buffalo 24-karat because they couldn't keep up with demand. So, people are definitely buying gold.