This Week in the Mercury
Thursday, September 25, 2008
News Got Your Money In WaMu? Oh. Oh good.
Posted by Matt Davis on Thu, Sep 25, 2008 at 5:29 PM
The good news is, that the bank may have narrowly avoided the largest banking collapse in the history of government insurance. Washington Mutual was, to put it mildly, in a bit of a pickle until the news broke about an hour ago that the government is likely to seize control and sell its deposits to JP Morgan, with the deal expected to be formally announced at 6:15.
WaMu is projected to lose $19 billion in mortgage-related bad debts over the next three years, but analysts say it could lose up to $30bn in that period. Shares in WaMu are down 25% on the news. What does this mean for people with money, mortgages, and the like in WaMu? Well, it's too early to tell. But you should be better off than if the company had collapsed altogether. Oddly, that's strange comfort in these uncertain times.
Would you have believed Washington Mutual might go under if I'd told you last week? I'm starting to think the best place for my money might be under the mattress.
It is a good thing this nation had leaders 70 years ago.
And yes, you could envision this one week ago, when Washington Mutual was frantically running around looking for buyers last Friday.
Have a good, non-panicky day.
"If money isn't loosened up, this sucker could go down."
No referent provided for "sucker," but the inference is fairly easy to make.
3
I am now wishing I paid closer attention in those econ classes.
5
JP Morgan buying the bank's deposits means nobody's in trouble. If JP Morgan hadn't bought the bank's deposits, the FDIC would have had to have covered the cost of the bank going down. Which, for the time being, would have been fine.
The problem occurs when the FDIC runs out of money. Then what?! If WaMu had folded, it would have been the biggest collapse in the history of the FDIC. It was looking dicey for a while, too.
Considering that thirty banks have failed since April, it certainly seems that there is extraordinary pressure on the FDIC. Whee!
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