In the biggest bank failure in history, Washington Mutual Bank has been shut down by federal regulators.
The Office of Thrift Supervision closed the Seattle-based thrift today, an announcement this evening said. The Federal Deposit Insurance Corporation has been appointed receiver.
WaMu had suffered three straight quarters of losses totaling $6.1 billion as a result of a deteriorating real estate market.
The collapse was prompted by a run on deposits that began on Sept. 15. A total of $16.7 billion in deposits were withdrawn. The run left the company too unsafe and unsound to continue operating.
WaMu had been desperately seeking investors domestically and abroad, but came up short.
A bidding process conducted by the FDIC resulted in the acquisition of the $307 billion bank by JPMorgan Chase & Co.
A $1.9 billion payment was made by JPMorgan.
In a statement, JPMorgan noted the acquisition makes it the largest U.S. depository institution — with more than $900 billion in customer deposits. Assets and liabilities of parent Washington Mutual Inc. are excluded from the purchase.
“This deal makes excellent strategic sense for our company and our shareholders. Our people have worked hard to build a strong franchise and balance sheet — making this compelling transaction possible,” JPMorgan Chairman and Chief Executive Officer Jamie Dimon said in the announcement
Branches will open Friday uninterrupted.
“WaMu became an OTS-regulated institution on December 27, 1988 and grew through acquisitions between 1996 and 2002 to become the largest savings association supervised by the agency,” OTS stated. “As of June 30, 2008, WaMu had more than 43,000 employees, more than 2,200 branch offices in 15 states and $188.3 billion in deposits.”
FDIC noted all depositors are full protected and it expects to incur no costs as a result of the failure.
The closing of the thrift on a Thursday was highly unusual for OTC, which usually announces the closing of financial institutions on Friday evenings and works through the weekend to transition deposits to a new entity.
As of June 30, WaMu held $118.9 billion in residential loans for investment, including $52.9 billion in payment option adjustable-rate mortgages and $16.1 billion in subprime loans, OTS said. Home-equity lines-of-credit were $53.4 billion.
JPMorgan noted it would mark down the portfolio by $31 billion and consequently raise additional capital.
The servicing portfolio ended the latest quarter at $689.7 billion.
WaMu is the 13th FDIC-insured institution to fail this year.
