Troubled bank Washington Mutual (WaMu) has been purchased by JPMorgan Chase for $1.9 billion, according to the Federal Deposit Insurance Corp., which seized the bank Thursday and announced the critical deal the same evening.
Before the housing crisis, WaMu had grown to become one of the country’s largest banks and most active mortgage lenders. As such, the FDIC’s action Thursday represents the largest bank seizure in U.S. history, according to the New York Times, which provided additional background in a story published online Thursday night.“Federal regulators had been trying to broker a deal for Washington Mutual because a takeover by the F.D.I.C. would have dealt a crushing blow to the federal government’s deposit insurance fund," the story said. "The fund, which stood at $45.2 billion at the end of June, has been severely depleted after suffering a debilitating loss from the sudden collapse of IndyMac Bank. Analysts say that a failure of Washington Mutual would cost the fund upward of $20 billion or $30 billion.”
According to the FDIC’s announcement, there should be no cost to the FDiC’s insurance fund under the JPMorgan Chase deal and that all Washington Mutual “depositors are fully protected.”
"For all depositors and other customers of Washington Mutual Bank, this is simply a combination of two banks," FDIC Chairman Sheila C. Bair said in a statement. "For bank customers, it will be a seamless transition. There will be no interruption in services and bank customers should expect business as usual come Friday morning."
This is the second such emergency acquisition by JPMorgan this year; in March, it purchased investment bank Bear Stearns when that firm faced bankruptcy.
Alison Rice is senior editor, online, at BUILDER magazine.
Learn more about markets featured in this article: Washington, DC.