Last night, in the largest banking failure in U.S. history, everyone's favorite thrift Washington Mutual was seized by government regulators, which then promptly sold WaMu’s banking assets to JPMorgan Chase for $1.9 billion. JPMorgan, beating out other banks such as Wells Fargo and TD Bank in the bidding war (Citi, initially interested, opted not to bid), picked up a cool $188 billion in overall deposits, making it the nation’s largest holder of consumer deposits.
The combined firm has about 5,400 banking branches, about 10 percent of which JPMorgan plans to close. Several branches in cities such as New York and Chicago, where the two firms compete, will soon be history, meaning many retail banking employees in those areas will be laid off. Other folks who should be worrying about their futures include WaMu’s shareholders and creditors, who will likely receive this on their investments in the firm: $0. However, WaMu’s account holders can let out a collective sigh of relief: their cash is backed by the FDIC for up to $100,000; JPMorgan will back their deposits even further. As for what the big deal will mean for JPMorgan insiders, most have little to worry about since WaMu has little overlap with its new partner outside the consumer business.
Federal regulators moved relatively quickly to shut down WaMu—and did so on a Thursday, rather than Friday, which is the customary day to shut down a bank after soliciting bids all week (why this is so no one knows, but I have a hunch it has something to do with happy hour specials). Going against tradition, the Feds couldn’t wait another second, believing that WaMu’s collapse might be disastrous for the market (see "the AIG save," dated September 17, 2008; but not "the Lehman Brothers bankruptcy," September 15, 2008).
Despite the premature seizure, most industry observers (who, at this point, could be half of the American people, as the banking crisis has become more exciting than any reality TV series I’ve ever seen) believe some serious stuff will go down as a result of the shotgun marriage. And already, there's solid proof that they're right: Wachovia and National City have both seen their share prices plummet in early trading today; 28 percent and 40 percent, respectively.
On the upside, it looks like John McCain’s campaign called a double reverse on third and four, and the presidential debate is back on for tonight. Kickoff in Oxford is set for 9 p.m. EST. To sike yourself up, check out some magical moments from previous contests.