WaMu Fails, Feds Seize It, JP Morgan Buys It, Your Accounts Are Ok

The Feds seized Washington Mutual and JP Morgan bought it, but don’t fret, all your accounts ok. Online banking is completely functional. If you held WaMu stock, on the other hand, it’s now effectively worthless. Depositors began fleeing WaMu on September 15, the day Lehman Brothers filed for bankruptcy. In all, they took out about 9% of WaMu’s deposits, or $16.7 billion. Regulators say this left WaMu without enough capital to keep functioning. The shakedown and bailout continues apace. What new surprises will the government bring us today, Monday, or even over the weekend? At least this one didn’t require taxpayers to foot the bill.

JPMorgan buys WaMu [CNN] (Photo: So Cal Metro)

Comments

Edit Your Comment

  1. sleze69 says:

    Sorry Ben.

  2. lolababy says:

    To be honest, I was planning on changing banks, anyway, so this takes some of the hassle out of that.

    I, for one, welcome our Chase overlords.

  3. PersisDenter says:

    I just got an email from WaMu this morning, telling me to “Start savings for the holidays!” and an offer for 5% APR on a 12/13 month online CD.

  4. dtmoulton says:

    *throws worthless paper to the floor and curses God*

  5. Mfalconieri says:

    I am still taking my $5 out of WaMu, I just hope my “home credit line” with them falls through Chases cracks. That would be sweet!

  6. DeleteThisAccount says:

    At least it wasn’t BoA. I need to find a local credit union. Ugh. I miss my WaMu. I heard a lot of crap on here about them, but to me, they’ve been nothing but golden. The WaMu is Dead, Long Live WaMu (Chase)!

  7. blackmage439 says:

    WOO-HOO! [We just seized!]

    Good riddance to bad rubbish. I’m surprised Ben was able to dodge their lying, stupidity, and underhanded business practices all this time. Not that Chase is any better, but I’ve personally never had a problem with them; of course, I only have two credit cards with them ~ no bank accounts.

    • blackmage439 says:

      @blackmage439: Oh, the post just updated, and I noticed this interesting tidbit:

      “In all, they took out about 9% of WaMu’s deposits, or $16.7 billion. Regulators say this left WaMu without enough capital to keep functioning.”

      So, I am interpreting this correctly in that WaMu would have been fine if panicky bastards hadn’t performed a good ol’ bank run? Sounds like about %50 of what’s wrong with the US’s economy right now.

      • jwinston2 says:

        @blackmage439:

        Actually I think the more accurate statement is that WAMU would have been fine if they had not been greedy bastards and gave out subprime and Alt-A loans to individuals who clearly should not of had those loans.

        But sure ignore the underlying disease.

        • blackmage439 says:

          @jwinston2:

          You misinterpret my statement. The other half of what’s wrong is greedy bastards, as you said. Yes, I believe these CEOs, bankers, and whoever else was responsible for the illegal and amoral activities all need a swift few kicks in the nuts. However, it is wrong to allow these institutions to fail at the expense of their customers’ (read: NOT their shareholders) well being.

          I’m just saying a bank run and subsequent failure doesn’t do anybody any good. That’s all. It’s not like Chase and Bank of America are holy saviors in this crisis. Their both two of the greediest and shadiest banks in the country. The only difference is that neither of them were stupid enough to get heavily involved in these dishonest loans. That’s why they both have the capital to gobble up all of these other institutions. When the dust settles, there will be trouble without proper regulation. Chase and BoA will most certainly hold a monopoly on banking institutions in this country, if they don’t already…

          • jwinston2 says:

            @blackmage439:

            I understand your point but just disagree. The customers are the ones who risk having their assets in the bank. If they trust the bank they leave deposits because they think the bank is safe. When a bank breaks this trust by say giving out billions of dollars of the customers money to unhealthy loans, then the customers certainly have a right to demand their money so they can leave and go to another bank who is not being stupid and giving out money to Moondoggie down the street.

            • blackmage439 says:

              @jwinston2: Good point. Thanks for the insight. I would certainly do the same thing. Heck, I withdrew my money from Countrywide just before they were bought by BoA, and I was glad I did.

        • CountryJustice says:

          @jwinston2: Exactly what I was thinking. Why was WaMu counting on the last 9% of it’s revenue to fund basic operating costs? Sounds waaaaay too risky for this cowboy.

          • xsmasher says:

            @CountryJustice: “Why was WaMu counting on the last 9% of it’s revenue to fund basic operating costs?”

            Suppose I took 9% of your *net worth* out of your checking account. Right now. Would you have enough left for your “basic operating costs” until the next payday?

            Many of the banks assets are tied up in long term investments which they can’t turn into cash readily. If everyone shows up asking for cash, they’re screwed.

      • LatherRinseRepeat says:

        @blackmage439:

        Yes, customer withdrawals contributed to WaMu’s demise. If people didn’t panic, the government wouldn’t have stepped in and seized control. Well, maybe they would have eventually, but not so soon. My guess is that this news will cause a knee jerk reaction and other people will start pulling their money out and stashing it under their mattresses.

        It’s really unfortunate though. My experience with WaMu has been great. Much better than my previous bank, Bank Of America.

      • ameyer says:

        @blackmage439:
        As I understand it, WaMu was in trouble before the subprime poop started hittng the fan.
        Maybe they would have survived, maybe they wouldn’t have.
        The bank run certainly didn’t help, though.

  8. Half Beast says:

    WaMu: D’oh!

  9. KesCaesar says:

    That’s a shame, I was thinking of switching to their higher APY savings account.

  10. ahwahoo2006 says:

    I guess the old stodgy bankers in their commercials finally gave the young whippersnapper his comeuppance.

  11. rrrebo says:

    Damn, I hadn’t seen a post on this yet, so I just sent in a pic of the website, Ben. Check the tips mailbox.

    AngrySicilian: I heard a lot of crap on here about them, but to me, they’ve been nothing but golden.

    This. Never had anything but great service from WAMU, despite all the horror stories I’ve heard.

    • Shenanigans Was Taken says:

      @rrrebo: Can I add another “me to” to the chorus of haven’t had a bad experience with WaMu in the nearly seven years I have been with them.

      Have I asked a lot of them; well, no. But they did their job of holding onto my money and not charging me an arm and a leg for doing so… and that is really all I am looking for in a bank at this point in my life.

  12. conformco says:

    Does this mean I can use my Chase ATM at WaMu branches and skip that 3 dollar service charge? Sweet.

    Sorry about your stocks.

  13. Well hell. I hope all the bank-in-a-box branches they’ve opened will stick around, even if they get rebranded. I’d hate to have to switch to BoA (the only other significant banking presence in Dallas) just as the locations were getting good.

    • Ein2015 says:

      @YourTechSupport: Same here. There’s a WaMu next to UTD… next to where I lived in Houston… next to my old workplace AND my new workplace… it was so amazingly convenient to use CASH! :D

      If they close down, I might go Mr. Stabby!

  14. y2julio says:

    So WaMu was safe till the media caused people to panic and withdraw their money thus making WaMu actually fail? Maybe they should keep information like that closed.

  15. rrrebo says:

    The story I’ve heard is that direct deposit will not be affected, and less than 10% of the two companies’ total combined branches will be shut down.

    • m4ximusprim3 says:

      @rrrebo: Chase is primarily an east coast bank and they’ve been eyeing wamu for a while as a way to move in on the west coast- I would bet any WAMU branches they close will be the ones in the midwest where chase already exists in force.

  16. hellinmyeyes says:

    I love Chase. No experience with WaMu, personally. I just hope that Chase gets some return off buying up distressed assets to afford their little spending spree lately.

    • azntg says:

      @hellinmyeyes: The returns will be made by YOU. Not you personally, I refer to the collective customers of JPMorgan Chase. Through higher fees, lower interest rates on savings, higher interest rates on loans.

      Join us in watching Chase become less and less competitive (along with other major banks out there). First, it’ll be the new accounts that’ll the first to receive the shaft. Then, it’ll be our grandfathered accounts, which will get them retroactively. Shame.

      For me, Washington Mutual has been just about perfect. Granted, I didn’t have tough demands or really high standards; just a good place to store my money without being charged fees up the wazoo. No screwups, no fees to store my money and decent (but no more) customer service. Washington Mutual, it was nice knowing ya and doing business with ya.

  17. jwinston2 says:

    I think most people here are just ignoring one major fact: [calculatedrisk.blogspot.com]

    “WaMu has $53 billion in option adjustable-rate mortgages … Of the $53 billion in option ARMs, $14 billion of these are to the riskiest segment in mortgage lending, subprime borrowers.

    WaMu also has $62 billion in home-equity loans …

    Mr. Bove predicts that WaMu will lose $40 billion over the next three years on its loan portfolio. If the economy weakens further and losses are even higher, he said, “the future of the company is questionable.”

    So sure lets just ignore the fact they were greedy bastards.

    • kathyl says:

      @jwinston2: This.

      Let’s not blame this on the people who withdrew their money. Let’s blame this on the shaky lending practices that forced the bank to have a higher total of deposits in order to continue operating.

  18. MyPetFly says:

    Thanks to the FDIC, my $3.15 is safe and sound in my WaMu account.

  19. mindshadow says:

    So, if I have a WaMu credit card, does that mean I don’t have to pay it anymore? :) Or maybe I can claim I paid it plus a few thousand extra when they get their share of that $700,000,000,000 bailout (or is it $1.2 trillion? I hear the banks are saying they may need another $500 billion).

  20. punksmurph says:

    At least the change was seamless for me so far. WaMu has been great to me, but I don’t plan on having chase as a bank.

  21. mbd says:

    I use my WaMu free checking account almost exclusively for PayPal/eBay, since it does not require any minimum deposits or any direct deposit to remain free.

    Chase requires direct deposit to remain free, otherwise there seems to be a $12 month charge.

    Does this mean that I will start being charged a fee?

    Will I be notified in advance so I can close the account?

    I use a credit union for all other banking, so I have no intention of direct depositing into chase.

    • y2julio says:

      @mbd: No, they will grandfather you account including any terms already made, ex: no minimum balance required. I could be wrong, so if I am, feel free to correct me.

      • newdeepdan says:

        @y2julio: What do you mean “grandfather your account”? I’m not familiar with that phrase.

        • humperdinck says:

          @newdeepdan: From Wikipedia, the free encyclopedia

          [en.wikipedia.org]

          A grandfather clause is a term used in U.S. English for an exception that allows an old rule to continue to apply to some existing situations, when a new rule will apply to all future situations. It is often used as a verb: to grandfather means to grant such an exemption. For example, a “grandfathered power plant” might be exempt from newer and tougher pollution laws. Often, such a provision is used as a compromise, to effect new rules without upsetting a well-established logistical or political situation. This extends the idea of a rule not being retroactively applied. A portion of a statute that provides that the law is not applicable in certain circumstances due to preexisting facts.

      • azntg says:

        @y2julio: Count me in as one of those people that really wish that Chase will continue to honor the terms, conditions and perks that Washington Mutual did. After all, I still have an account with WaMu too.

        However, I’m inclined to doubt that. If history repeats itself, Chase will likely convert WaMu accounts into another one with completely inferior features and added fees (I fear that it might be even worse than some of the crappy offerings that Chase has already; Why not? Any semblance of competition has decreased dramatically over the last year alone)

        • y2julio says:

          @azntg: My uncle had an account with a small local NYC bank that got bought out by Citibank. Citibank has a deposit minimum, his old account didn’t have one, so when they bought the bank he still kept his old terms of not having to have a minimum balance. So I’m not sure if it’s like that with all banks or if Citibank was just being nice with him.

  22. Burgandy says:

    I’ve been with Chase since it ate my old bank in the mid 80s and have not had a single problem with them except they don’t have a change counter at my location. That’s my biggest gripe, they have friendly staff, they actually answer the phone, they know my name when I walk in, they call me before shutting off my card for unusual spending patterns (Bank of America didn’t call us, just shut down our card, Thanks guys!)

  23. HIV 2 Elway says:

    @jwinston2: Everyone is quick to blame the bankers. It was the rating agencies that rated these mortgage backed securities as less risky than they truly were.

  24. cjc says:

    Oh, goody, I get Chase ATMs in California now when I visit.

    • SarcasticDwarf says:

      @cjc: I live in the capitol city of Montana and we don’t have either. The *only* national bank we have (heck, probably the only one with more than two branches anywhere) is US Bank. While they have some of the nicest tellers they are overall completely and utterly incompetent. So far they have merged my business and personal account information, then they merged the STATEMENTS (hurray for screwing up my taxes), and for added fun they can’t do *anything* over the phone for business accounts. *sigh*

  25. parkavery says:

    So I was once with Providian, then they became WaMu, and now I’m with Chase? Fantastic. Do I get a super-special prize for getting to experience the trifecta of poor customer service?

  26. logicalnoise says:

    @rrrebo: which is great news overall.

  27. logicalnoise says:

    @parkavery: You get 100 banker points where are as useful as Xbox live’s gamerpoints.

  28. HIV 2 Elway says:

    @newdeepdan: Whatever you have sticks. Example: When they changed the drinking age from 18 to 21 people who were 19 were “gradfathered in” and could continue to leagally drink.

  29. Red_Eye says:

    See everyone who gambled on WaMu Stock lost, and wont be getting squat. Why the hell should we bail out the companies. Business is always an informed risk. They took it they failed, live learn go on.

  30. Yogambo says:

    The bank run did do the in and the constant press coverage of their troubles did nothing to slow that down. It was entirely possible that “come Monday (it’ll be all right)” the bailout plan might have come together and taken all that exposure off their books saving them. The Fed indicated it was going to wait until Friday but that they were afraid there would be “media leaks” that would cause a futher run on the bank. That’s been a huge issue all the way through this – perception becomes reality. I’m not sure I like it.

  31. Trick says:

    So for those who are complaining about those taking their money. Why shouldn’t they? WaMu suits and policies sank the bank, not the customers.

    Why should the customers have to get in line and wait for their money from the FDIC? Why should customers have to go through the hassle on top of having to foot the bill because Wall Street and *BOTH* political parties caused this major financial melt down?

  32. fizatdh says:

    So… Now my money is with Chase? Do I have to change accounts or banks? I’ve got direct deposit and a savings account with WAMU.

    Whats the protocol here?

  33. emona says:

    My future sister-in-law works there, according to her they had a conference call and were told they had more than enough to bail themselves out, no takeover required. Guess they lied. (My account was opened before the sister-in-law showed up, so any praise I have is based on my own experience.)

    Seriously bummed out. I have had a WaMu account for over six years, absolutely loved everything about them. I never had an issue that couldn’t be fixed with one phone call. I know one thing: I do NOT want to be a Chase customer. I don’t know where else to go, though. My boyfriend’s trying to convince me over to Bank of America, but the idea makes me sick.

    • Elvisisdead says:

      @emona: USAA Federal Savings Bank FTW. No chance of them going under. As a matter of fact, they recently sent out the “while everyone else has gone nuts recently, we are nice and safe and conservative” message. LOVE them. They’ve recently changed their qualification rules to include people who were honorably discharged, so check it out.

  34. buckfutt says:

    Oh, well. Back to the credit union for me.

  35. newdeepdan says:

    [www.chase.com]

    but no word if my free checking is still free checking.

  36. Roy Hobbs says:

    Don’t you see, people! Potter’s not selling! He’s buying! We just have to keep our heads and we’ll get through this!

    I propose that the bank run portion of It’s a Wonderful Life precede every evening newscast as part of the bailout plan.

  37. SiddhimaAmythaon says:

    O crud puppy’s my mortgage is with Wamu. (Lucky its a 6% fixed) I hope they don’t screw up my direct payment last time i had direct payment with a company and they got bough all hell broke louse.

  38. m4ximusprim3 says:

    @newdeepdan: It means they will sit you on their knee and tell you stories about how tricky charlie was. Damn VC were everywhere!

    Actually, it means they’ll keep honoring the terms of everyone’s current accounts, but they probably won’t offer them to new customers.

  39. Xmar says:

    I always had good service with wamu.
    I wonder if I will still be able to see my current FICO score for free just for having a wamu credit card…

  40. m4ximusprim3 says:

    @m4ximusprim3: that comment should be nested right after newdeepdan’s. In case anyone is looking.

  41. mac-phisto says:

    i know it’s a bit soon for this – the dust hasn’t even begun to settle yet on this crap – but i think we need to start taking inventory about what’s really going on here.

    (don tin foil hat) can we consider for a moment who’s making some big bucks here? JPM just bought off the fdic to basically steal wamu from its investors. no doubt wamu was in trouble, but there’s something fishy going on here.

    let’s take a look at some of the other acquisitions: bear sterns to JPM for little more than the appraised value of their downtown office. countrywide to BAC for $4/share. merrill’s the only one that’s negotiated a half decent deal for its investors these days (& it’s a stretch to consider $1 over 52-week low as “half-decent”, but hey, at least they got something).

    all these companies are now being folded into 2 of the largest BHCs in the u.s. – both valued ~$1.75 TRILLION in assets. could it be that perhaps these takeovers were orchestrated? i mean, this is classic acquisition strategy: dilute a company’s stock, incite investor panic & ride in on a white horse offering to save everyone (for a fraction of actual value, of course).

    • theblackdog says:

      @mac-phisto: My dad put it best last night, he said that Bernake and Paulson are acting like the mafia thugs that walk into your store and say “Hi, I see you’re making some good money, this is a nice store, it would be awful if anything should happen to it…”

      • stevejust says:

        @theblackdog: What makes it even more interesting is I read in the SF Chronicle on Sunday about three weeks ago that a lot of this “save-our-homes” legislation was actually written by BoA lobbyists. I mean, that’s not a big surprise, lobbyists write legislation all the time. But it also means they know how to exploit the loopholes they put in that legislation on purpose. Saw it in the print edition, wasn’t able to find the story on-line to post here.

  42. spikespeigel says:

    Does anyone know what’s going to happen to all these checks I have with WaMu on them? Are these no longer good? Or are they good until Chase issues me new checks?

  43. chiieddy says:

    And there goes $3k out the window. Thanks WaMu.

  44. mavrick67 says:

    As a banker with 20 years experience in the industry and veteran of about 8 takeovers throught the years I can give you this scenario. (Timeframes are estimates, but should be pretty close)

    Day 1 after takover – 3 Months,
    Nothing changes, you keep writing your same checks. You get the same statement in the same format. You log in to the same website address for internet banking. Maybe you see some new faces in your office from the “Takeover” bank (in this case JP Morgan Chase)

    3 to 6 months out,
    Few changes, mostly minor. You order checks and it has the new banks name on it, maybe new procedures for sending wire transfers or making loan payments. Half of the staff at your local branch has quit or been “re-assigned” elsewhere. They start changing the signage outside the office and get new brochures, but your accounts stay the same.

    6 months to a year,
    you get notice that the format of your checks will change in a few months but you still can use your old checks for now and you might get assigned a new account number or given a new format that adds or subtracts digits. Some freebees you used to get with your account have dissappeared (ie. you now get charged for a safe deposit box rather than get it for free). They’ve changed the hours the office is open. The only person you recognize when you go to the office is old Ethel, the head teller whos been there since 1977.

    1 year out +,
    You get notice in the mail that your old account type is being discontinued and you now have the some new “special” type of account. you not supposed to use your old checks anymore, if you make a mistake and write one anyway they’ll probably pay it. Ethel retired and you don’t know a sole in your old branch and it looks like any other Chase office.

  45. TemplaEuryclea says:

    Another gift from the government to JPMC, they must be loving it.

    They get Bear Stearns, sans debt, in March (federal reserve keeps debt), and now they get the 6th largest bank in the U.S. for pennies on the dollar (U.S. Treasury keeps the debt). Someone really, really loves JPMC.

    Why buy a bank these days when you can wait for the government to gift it to you?? No wonder Wamu couldn’t find a buyer for itself. The government has set a stupid and dangerous precedent with the Bear Stearns criminal gift, and have now reinforced that precedent with a second gift, to the same recipient. Fantastic.

    From what I have read, the withdrawal of deposits was not the cause, it was a credit rating downgrade by, guess who, standard and poors, which was the end for Wamu. When the credit rating is reduced, triggers cause certain debts to require payment and wamu couldn’t get a line of credit to pay the calls because the credit market is effectively frozen while the circus in U.S. Congress plays out.

    The withdrawal of 16 billion was not a cause, as even after the ~$16 billion they still had (and now JPMC has) 188 *BILLION* in deposits. The government just gave JPMC $188 BILLION DOLLARS for the cost of, $1.9 billion, SANS the offsetting debt. Does anyone think this sounds like a F$%^ING CRIME?? I would like to pay the government 19 dollars and receive 188 dollars in return. I think I deserve that! Anyone else?

    Would you pay $1.9 billion in return for $188 billion? Freaking Christmas, man.

    With the gifts of Bear Stearns and Wamu by the government to JPMC, JPMC is one of the largest financial institutions in the world now, measured by any of: deposits, assets, or standard thrift customers. JPMC now has a deposit base of 900 BILLION DOLLARS.

    Even funnier that Wamu turned down a takeover offer from JPMC for $8 a share in late March 08. Highlarious. Idiots.

    Another story drifting around this morning is that the 16.7 billion left Wamu in total of 11 days (8 business days), which means 2.1 billion per day, and some people are saying it’s possible that was orchestrated by some large financial players and not wholly coincidental individual customer action.

    The other big story is billions of dollars of wealth going *poof* as all of the large investors in Wamu, including the private equity firm that put $7 billion into them in April for an ownership share, and retirement funds like teachers unions and such, now hold paper worth ZERO while JPMC gets FAT CHRISTMAS FOR FREE!

    And the next story in this saga will be a Sunday morning announcement, that very few people will hear or notice, that the Fed has agreed to relieve JPMC of Wamu’s toxic debt pool as a condition of the JPMC acquisition. GREAT.

    This whole fiasco is the crime of the century, starting with the Bear Stearns criminal undertaking by Treasury and Fed. CRIMINAL, CRIMINAL, CRIMINAL.

    Sickening.

  46. StanislausBabalistic says:

    This is so infuriating. I’m with BoA, and absolutely loathe them, and of course they’re the only bank not going under. I have -$261 in my account. Every penny is a goddamn overdraft fee.

    I’ve been contemplating a chase account – still a good idea?

  47. It’s looking like Chase and BoA are going to end up owning every commercial bank in the land. Time to contact your friendly local credit union.

  48. ZukeZuke says:

    @ Consumerist – nice job at helping to cause the run on WaMu with the daily alarmist posts! Sheesh.

    • KSPRAYDAD says:

      @ZukeZuke:

      Or…Maybe Wamu shouldn’t have run their company like a bunch of ass hats and they’d still be around.

      BLAME THE BLOG…BLAME THE BLOG…