Washington Mutual taken over by the Government

The U.S. government has taken over Washington Mutual, which is said to be the largest bank seizure in American history. The pieces from Washington Mutual have then been sold to JPMorgan Chase “in an emergency deal intended to avoid sticking the taxpayer with a bill for another bank.”
This is the second time that JPMorgan has acquired pieces of another bank. Earlier in the year, JPMorgan had bought Lehman Brothers and now it has pieces of Washington Mutual. The good part is that this deal will give JPMorgan access to places in the west coast, like California. The bad part is that JPMorgan will also inherit “a big loan portfolio of troubled mortgages and commercial real estate.” It is interesting to note that JPMorgan had offered to buy the entire company earlier this year because Washington Mutual was predicted to go bankrupt.
WaMu is a 119 year old independently running company and was one of Wall Street’s strongest performers. It had offered mortgages and credit cards to lower and middle class consumers (clients that other banks considered risky) and set terms which made it easy for the least creditworthy borrowers to get financing. This way, WaMu had become the sixth-largest bank in the United States till the the housing market began to fall. With rising mortgage payments and higher gas and food bills, WaMu’s losses in its big credit card loan portfolio also increased. This was when JPMorgan made its offer to buy WaMu.
It will be interesting to see how JPMorgan deals with its newfound market reach. Lehman Brothers, Merrill Lynch, American Insurance Group and WaMu were companies that were at least 100 years old, and it will be interesting to see which firm is next on the government’s list to take over and sell due to bankruptcy.