Government Seizes WaMu and Sells Some Assets

Government Seizes WaMu and Sells Some Assets
Eric Dash and Andrew Ross Sorkin
Sep 25, 2008

http://www.nytimes.com/2008/09/26/
business/26wamu.html?_r=1&oref=slogin

Washington Mutual, the giant lender that came to symbolize the excesses of the mortgage boom, was seized by federal regulators on Thursday night, in what is by far the largest bank failure in American history.

Regulators simultaneously brokered an emergency sale of virtually all of Washington Mutual, the nation’s largest savings and loan, to JPMorgan Chase for $1.9 billion, averting another potentially huge taxpayer bill for the rescue of a failing institution.

The move came as lawmakers reached a stalemate over the passage of a $700 billion bailout fund designed to help ailing banks, and removed one of America’s most troubled banks from the financial landscape.

Customers of WaMu, based in Seattle, are unlikely to be affected, although shareholders and some bondholders will be wiped out. WaMu account holders are guaranteed by the Federal Deposit Insurance Corporation up to $100,000, and additional deposits will be backed by JPMorgan Chase.

By taking on all of WaMu’s troubled mortgages and credit card loans, JPMorgan Chase will absorb at least $31 billion in losses that would normally have fallen to the F.D.I.C.

JPMorgan Chase, which acquired Bear Stearns only six months ago in another shotgun deal brokered by the government, is to take control Friday of all of WaMu’s deposits and bank branches, creating a nationwide retail franchise that rivals only Bank of America. But JPMorgan will also take on Washington Mutual’s big portfolio of troubled assets, and plans to shut down at least 10 percent of the combined company’s 5,400 branches in markets like New York and Chicago, where they compete. The bank also plans to raise an additional $8 billion by issuing common stock on Friday to pay for the deal.

How Much Will Government Bailouts Actually Cost The American Taxpayer?

How Much Will Government Bailouts Actually Cost The American Taxpayer?
Richard Benson
Benson's Economic & Market Trends
August 11, 2008

http://www.financialsense.com/editorials/benson/2008/0811.html

What is this economic disaster going to cost the taxpayer? Let's try to add it up.

The Federal Reserve: Let's say the Fed gets stiffed for $10 billion, a modest sum. That translates into $10 billion less in profits from the Fed to send the US Treasury, and $10 billion more for the taxpayer to pay.

Student Loans: We estimate that several hundred billion of student loans are outstanding, and the average debt per student is $20,000. Conservatively, put the cost down at $20 billion.

Pension Benefit Guarantee Corporation: This government agency insures $2.5 trillion in Defined Benefit obligations. The PBGC covers 30,000 business plans and 44 million workers. The PBGC charges an insurance fee and has $55 billion in assets. Let's put the cost to the taxpayer at a conservative $30 billion.

Federal Housing Administration: The FHA has given insured single-family mortgages to about five million people and 17 percent (or one in six) are delinquent. These catastrophic losses represent the worst of "cash for trash" lending that is crushing financial institutions in subprime. Conservative cost is $20 billion.

Small Business Administration: At the end on 2007, the balance of these SBA loans totaled $235 billion, with cumulative losses of about six percent. But don’t let history of only 6 percent losses fool you. As the economy turns down, many of the businesses with SBA loans will fail. For now, let's put this bill at a $20 billion loss.

Federal Home Loan Banks: The FHLB has over $1 trillion in assets, but what are these assets really worth? Well, a lot of mortgages that went into the collateral are Alt-A loans (interest only, no income verification, principal deferred). The real challenge, though, will be between the FHLB and FDIC as they fight to determine who gets stuck with the losses when the banks, thrifts, and credit unions fail. Either way, we’ll foot the bill. Let's put this one down for $50 billion, which is only five percent of the assets of the FHLB.

Federal Deposit Insurance Corporation: Even if a large portion of the bad single-family mortgage debt can be pushed back into the FHLB or over to Fannie Freddie, total losses on construction, commercial properties and consumer loans will easily cost the FDIC, and therefore the US taxpayer, $100 billion. If the government encourages people not to pay their mortgages and live rent free at our expense, we’ll need to increase the expected FDIC bill to the American taxpayer to $150 billion.

Fannie Mae and Freddie Mac: With a record number of homeowners considering whether to live free for 300 days by skipping their mortgage payments, imagine the cash gap that will open up between the cash that comes into Fannie & Freddie from mortgage payments, and the cash that must go out to cover the GSE security payments. For the government, it is more important to spread the losses into the future than to minimize them. Losses on defaulted mortgage loans at the GSEs will be horrible. Put the bailout cost at $300 billion.

Ten Financial Entities On The Brink

Ten Financial Entities On The Brink
Mike Shedlock
Mish's Global Economic Trend Analysis
August 22, 2008

http://globaleconomicanalysis.blogspot.com/
2008/08/ten-financial-entities-on-brink.html

Lehman (LEH)
Washington Mutual (WM)
Fannie Mae (FNM)
Freddie Mac (FRE)
Corus Bank (CORS)
BankUnited (BKUNA)
Downey Savings (DSL)
Wachovia (WB)
Regions Financial (RF)
MBIA (MBI)
Ambac (ABK)

On account of deflation, I had to throw in a bonus 11th. Everyone wants more for their money these days, even when things like this are free.

I am quite sure there are many more deserving candidates that should be on the list. An excellent case can be made for Ford (F) and GM. They are really not manufacturing companies but rather financial lending disasters.

The key here is there is virtually no chance the Fed can save them all, or even most of them. The list is simply Too Big To Bail.

FDIC Fund Strained by Bank Failures May Lift Premiums

FDIC Fund Strained by Bank Failures May Lift Premiums (Update2)
By Alison Vekshin
Aug. 11 (Bloomberg)

http://www.bloomberg.com/apps/news?pid=20601109&sid=a35CvKfLq65Q

"It's going to be a bloody, expensive mess for the banking industry," said Bert Ely, president of Ely & Co. Inc., a bank consulting firm based in Alexandria, Virginia. "Healthy banks are paying for the mistakes made by failed banks."

The pace of bank closings is accelerating as financial firms have reported almost $495 billion in writedowns and credit losses since 2007. The FDIC's "problem" bank list grew by 18 percent in the first quarter from the fourth, to 90 banks with combined assets of $26.3 billion. A revised list is due this month. The insurance fund had $52.8 billion as of March 31.

Failed Bank List

Failed Bank List

http://www.fdic.gov/bank/individual/failed/banklist.html

The FDIC is often appointed as receiver for failed banks. This page contains useful information for the customers and vendors of these banks. This includes information on the acquiring bank (if applicable), how your accounts and loans are affected, and how vendors can file claims against the receivership.

This list includes banks which have failed since October 1, 2000.

First Priority Bank, Bradenton, FL (August 1, 2008)
First Heritage Bank, NA, Newport Beach, CA(July 25, 2008)
First National Bank of Nevada, Reno, NV (July 25, 2008)
IndyMac Bank, Pasadena, CA (July 11, 2008)
First Integrity Bank, NA, Staples, MN(May 30, 2008)
ANB Financial, NA, Bentonville, AR (May 9, 2008)
Hume Bank, Hume, MO (March 7, 2008)
Douglass National Bank, Kansas City, MO (January 25, 2008)
Miami Valley Bank, Lakeview, OH (October 4, 2007)
NetBank, Alpharetta, GA (September 28, 2007)
Metropolitan Savings Bank, Pittsburgh, PA (February 2, 2007)
Bank of Ephraim, Ephraim, UT (June 25, 2004)
Reliance Bank, White Plains, NY (March 19, 2004)
Guaranty National Bank of Tallahassee, Tallahassee, FL (March 12, 2004)
Dollar Savings Bank, Newark, NJ (February 14, 2004)
Pulaski Savings Bank, Philadelphia, PA (November 14, 2003)
The First National Bank of Blanchardville, Blanchardville, WI (May 9, 2003)
Southern Pacific Bank, Torrance, CA (February 7, 2003)
The Farmers Bank of Cheneyville, Cheneyville, LA (December 17, 2002)
The Bank of Alamo, Alamo, TN (November 8, 2002)
AmTrade International Bank of Georgia, Atlanta, GA (September 30, 2002)
Universal Federal Savings Bank, Chicago, IL (June 27, 2002)
Connecticut Bank of Commerce, Stamford, CT (June 26, 2002)
New Century Bank, Shelby Township, MI (March 28, 2002)
Net 1st National Bank, Boca Raton, FL (March 1, 2002)
NextBank, N.A., Phoenix, AZ (February 7, 2002)
Oakwood Deposit Bank Company, Oakwood, OH (February 1, 2002)
Bank of Sierra Blanca, Sierra Blanca, TX (January 18, 2002)
Hamilton Bank, N.A., Miami, FL (January 11, 2002)
Sinclair National Bank, Gravette, AR (September 7, 2001)
Superior Bank, FSB, Hinsdale, IL (July 27, 2001)
The Malta National Bank, Malta, OH (May 3, 2001)
First Alliance Bank & Trust Company, Manchester, NH (February 2, 2001)
National State Bank of Metropolis, Metropolis, IL (December 14, 2000)
Bank of Honolulu, Honolulu, HI October 13, 2000 (March 17, 2005)

Who pays when lenders fail?

Who pays when lenders fail?
Don't foreclose - keep borrowers in their homes
Ted W. Lieu
Thursday, August 7, 2008

http://www.sfgate.com/cgi-bin/article.cgi?f=/c/a/2008/08/06/ED361269K6.DTL

If there is any silver lining to the second largest thrift failure in U.S. history, it is this: the IndyMac bank collapse has ironically resulted in the nation's first foreclosure moratorium. The Federal Deposit Insurance Corporation, after taking over IndyMac, declared it would halt all foreclosures on the $15 billon worth of IndyMac mortgages and modify the loans to keep borrowers in their homes. In one fell swoop, the FDIC did what no presidential contender, governor, or legislator has been able to do: force a moratorium on a significant number of foreclosures.

IndyMac's dramatic collapse provides two important lessons learned. First, the bank's failure reminds us that preventing foreclosures helps everyone, including those who did not participate during the mortgage boom. Representing an Assembly district with several IndyMac branches, I know that customers who lost money on their uninsured deposits did so not because of their own doing, but because of a nationwide foreclosure crisis spiraling out of control.

IndyMac bank run: A sign of things to come?

IndyMac bank run: A sign of things to come?
Harry Koza
July 18, 2008

http://www.theglobeandmail.com/servlet/story/LAC.20080718.RKOZA18/TPStory/Business

That's kind of odd, since it was a substantial flameout. Indy was the second-largest mortgage lender in the United States, and the seventh-largest savings and loan, with $32-billion (U.S.) in assets and $19-billion in deposits - $1-billion uninsured. It was the biggest bank failure in years. Since 2000, according to the FDIC, there have been 32 bank failures in the United States, with IndyMac the fifth one so far in 2008 and bigger than all the other 31 put together.

The FDIC has another 90 to 150 banks on its list of "troubled" lenders, so it seems likely that there will be more banks going under in the months ahead. Somehow that doesn't seem to bode too well for all those predictions of a second-half recovery this year, you know, that mythical V-shaped chart form, dipping quickly into recession only to storm back up into a new boom.

If My Bank Collapses, How Long Before The FDIC Pays Up?

If My Bank Collapses, How Long Before The FDIC Pays Up?

The Consumerist
5:58 PM on Tue Jul 29 2008
By Ben Popken
12,314 views
24 comments

http://consumerist.com/5030701/if-my-bank-collapses-how-long-before-the-fdic-pays-up

If your FDIC-insured bank implodes, how long does it take for the FDIC to start paying depositors? Ever since IndyMac imploded, the question has no doubt been on many people's minds. One reader emailed me saying that he had asked the his banker about how long it might take. Allegedly, the banker squirmed around before finally saying that the FDIC had 20 years to pay people back. This is not true.

In reality, there is no statutory "upper limit" for when they have to pay you back by. Instead, the Federal Deposit Insurance Act states that the FDIC is required to pay insured depositors "as soon as possible."

8,500 U.S. banks; many will die soon(updated 3x)

8,500 U.S. banks; many will die soon(updated 3x)
by Stranded Wind http://stranded-wind.dailykos.com/
Sun Jul 20, 2008 at 03:49:28 AM PDT
http://www.dailykos.com/story/2008/7/20/64928/7807/206/554077

Bear Stearns got bailed out ‘cause they were highly visible (read: failure would have exposed aforementioned funny money to the average Joe), Freddie Mac and Fannie Mae are Government Sponsored Entities who now have their sickly balance sheets backstopped by the U.S. Treasury (read you & me), but all the commercial banks have is the Federal Deposit Insurance Corporation.

Great! All accounts are insured to $100,000! We’re saved!

Way wrong. The FDIC is an insurance operation. They make an educated guess as to how many banks will fail and what the total exposure is, then they collect insurance premiums from them. They’ve got $51 billion ... and Indymac alone sucked up 10% of that. If a big one lets go, like Washington Mutual or Wachovia, then the FDIC will look just like FEMA did facing down hurricane Katrina. Don’t go and look at the scoreboard on the Bank Implode-O-Meter unless you’ve got a very strong stomach. Oh, and do note that a good bit of those write downs are investment banks - the FDIC does not cover their activities.