Another large financial institution has been brought low by the troubles of Wall Street. Last night, the FDIC stepped in and took over Washington Mutual (WaMu) after it determined that the nation’s largest savings and loan wasn’t going to be able to remain solvent. JPMorgan/Chase then ’swooped’ in and bought the banking portion of WaMu for $1.9 billion.

WaMu has been ailing for quite a while now, what with the overall financial woes of Wall Street. It also had a significant amount of mortgage loans that have ended up as lead weights around it’s neck. Add to this the loss of over 95% of it’s stock price in recent months, and according to the Office of Thrift Supervision, a loss of more than 6 billion dollars recorded in the last three quarters, and WaMu was on rocky grounds.

The last two nails in the coffin however were

Consumer Confidence fell – Since September 15th, investors had lost faith in WaMu, and withdrew 16.7 billion in assets from the banking giant. This comes out to 9% of total deposits held at the institution, all in a matter of a few weeks.

Downgrade in Rating – Last night, WaMu’s ‘trustworthiness’ rating was reduced, making it a certainty that the savings and loan wouldn’t be able to get additional credit or funding from other banks. Without the additional funding, it became clear to the FDIC that WaMu wouldn’t be able to ‘right the ship’ and stepped in.

Going to the Highest Bidder

After the Fed stepped in, banking assets of the now-defunct institution were auctioned off/sold to JPMorgan/Chase. The same JPMorgan/Chase that bought Bear Stearns earler this year. This purchase gives JPMorgan an additional 2200 bank branches in the western United States, an area that previously had very few JPMorgan branches. JPMorgan has gotten quite a deal out of the WaMu hardship, 2200 new branches, and now with locations across the U.S. Even in the worst storms, there are silver linings.

But What About the Investors?

So what about the account holders and credit card users of WaMu? What’s this ‘change in the guard’ mean? Pretty much nothing. Come meet the new boss, same as the old boss. Hope you guessed my name.

There should be no discernable differences (for the time being) now that JPMorgan has taken over the banking parts of WaMu. I expect that there will be some re-shufffling, and a re-naming (maybe) in the future, but for the time being, everything is status quo. The mortgage and loans division of WaMu still might have some serious re-work ahead though.

For more information, see This Bizjournal Article