In one of the largest banks to fail in US history, Washington Mutual was effectively shut down by the Office of Thrift Supervision, or OTS, before it ran out of cash. Worried depositors withdrew a massive $16.7 billion in deposits since 15 September.
The OTS decided to step in before matters got worse and before selling its assets to JPMorgan Chase who eventually paid a mere $1.9 billion adding to its ever growing portfolio including the acquisition of Bear Stearns earlier this year.
Washington Mutual, or WaMu, was one of the worst hit banks after the collapse of the US sub-prime housing market in addition to sky high mortgage defaults. The OTS said, “With insufficient liquidity to meet its obligations, WaMu was in an unsafe and unsound condition to transact business”.
Bank customers were reassured their savings were safe said the Federal Deposit Insurance Corporation (FDIC). WaMu had around $307 billion in total assets of which $188 billion were made up from deposits. It had raised an extra $7 billion in capital from consortium group TPG in April however, mortgage defaults from lending to poor credit homeowners contributed to its demise.
JPMorgan’s acquisition of WaMu makes up its second fire-sale purchase since the credit crisis began last year.
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