Investment bank JP Morgan Chase has acquired Washington Mutual, the largest American institution for loans and savings, whose collapse marked the largest banking failure in the history of the country and further pressured the overstretched American financial system.
The acquisition was carried out under a $1.9 billion agreement announced late Thursday by the Federal Deposit Insurance Corporation (FDIC). Washington Mutual (WaMu) found itself pressured by losses on investments in the real estate market. After its shares lost 85 percent of their value this year, expectations grew that it would become the next victim of the global financial crisis. JPMorgan Chase, which acquired Bear Stearns in March, another investment banking giant that faltered under the weight of the crisis in the American financial sector, took over the deposits, assets, and part of the debts of this Seattle-based institution, located in the state of Washington, with total assets valued at approximately $309 billion.
The collapse of Washington Mutual surpasses the previous largest American banking collapse, that of the $40 billion Continental Illinois Bank in 1984. JPMorgan Chase announced the sale of shares worth $8 billion to raise capital. By acquiring WaMu, which has deposits worth approximately $188 billion, the largest depositary institution in the U.S. will be created, with a total of over $900 billion in customer deposits. "This agreement makes strategic sense for our company and our shareholders," said JPMorgan Chase CEO Jamie Dimon. FDIC Chair Stella Blair promised protection for all Washington Mutual clients, who presented themselves as a bank for ordinary citizens, focused on the middle market segment and small businesses. "For all depositors and other clients of Washington Mutual, this is just a merger of two banks," she said. "For them, it will be a smooth transition, with no interruptions," she added. (H)
