New York/Washington, Sept. 26: Washington Mutual Inc. is closed by the US government in by far the largest failure of a US bank, and its banking assets were sold to JPMorgan Chase & Co for $1.9 billion. Thursday’s seizure and sale is the latest historic step in the US government attempts to clean up a banking industry littered with toxic mortgage debt. Negotiations over a $700 billion bailout of the entire financial system stalled in Washington on Thursday.
Washington Mutual, the largest US savings and loan, has been one of the lenders hardest hit by the nation’s housing bust and credit crisis, and had already suffered from soaring mortgage losses. Washington Mutual was shut by the federal Office of Thrift Supervision, and the Federal Deposit Insurance Corp was named receiver. This followed $16.7 billion of deposit outflows at the Seattle-based thrift since September 15, the OTS said.
"With insufficient liquidity to meet its obligations, WaMu was in an unsafe and unsound condition to transact business," the OTS said.Customers should expect business as usual on Friday, and all depositors are fully protected, the FDIC said.
The FDIC chairman, Ms Sheila Bair, said the bailout happened on Thursday night because of media leaks, and to calm customers. Usually, the FDIC takes control of failed institutions on Friday nights, giving it the weekend to go through the books and enable them to reopen smoothly the following Monday. It vaults JPMorgan past Bank of America Corp to become the nation’s second-largest bank, with $2.04 trillion of assets.
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