JPMorgan buys WaMus bank network

Updated: Sep 30 2008, 04:11am hrs
JPMorgan Chase & Co became the biggest US bank by deposits, acquiring Washington Mutual Incs branch network for $1.9 billion after the thrift was seized in the largest US bank failure in history.

Customers of WaMu withdrew $16.7 billion from accounts since September 16, leaving the Seattle-based bank unsound, the Office of Thrift Supervision said late on Thursday. WaMus depositors will have full access to all their accounts, Sheila Bair, chairman of the Federal Deposit Insurance Corp (FDIC), said on a conference call.

WaMu is the latest casualty of a financial crisis that drove Lehman Brothers Holdings Inc and IndyMac Bancorp out of business and led to the hastily arranged rescues of Merrill Lynch & Co and Bear Stearns Cos, which was itself absorbed by JPMorgan.

WaMu in March rejected a takeover offer from JPMorgan CEO Jamie Dimon that the savings & loan valued at $4 a share. This is a fabulous franchise, Dimon, 52, said in an interview. We think we got this at a price that protects us, where if we were wrong, it still protects us.

WaMu collapsed as its credit rating was slashed to junk and its stock price tumbled. Facing $19 billion of losses on soured mortgage loans, the lender put itself up for sale last week. WaMu fired CEO Kerry Killinger on September 8 and replaced him with Alan Fishman, who was awarded a $7.5-million signing bonus and $1 million salary.

In most bank seizures, little or nothing is left for shareholders. WaMu, down 95% in the past year, dropped to 45 cents in extended trading following the announcement, which came after the close of regular trading on Thursday.


* Economy

In a significant relaxation of external commercial borrowings (ECB) rules, the government on Monday allowed infrastructure companies to repatriate up to $500 million, up from $100 million, and eased interest rate ceilings by 100 basis points on longer-term loans. This would provide the financing needs of the infrastructure sector a much-needed fillip. Like others, it has been caught in the pincer grip of a weakened equities market and expensive local debt market .

* Politics

The Nanavati Commission report probing into the Godhra train carnage was tabled in the Gujarat Assembly on Thursday amid high drama. The probe panel said the Sabarmati Express coach burning was a pre-planned conspiracy and it also gave a clean chit to Gujarat chief minister Narendra Modi and the state police in the subsequent post-Godhra riots .

* Markets

The move to make sovereign rupee bonds tradable on international bourses has gathered pace, with the finance ministry asking the 13th Finance Commission to work out some contours of the proposal. Making government debt paper visible among global pension funds and other buyers is integral to the agenda of developing an independent debt management office in India. Global trading in its bonds will help India to have an INR yield curve that can be pitched to international investors.

* International

The Federal Reserve set new currency swap lines worth $30 billion with central banks in Scandinavia and Australia on Wednesday to boost short-term US dollar liquidity and help drive down interbank lending rates. European money markets rates eased on Wednesday after the Feds move, but analysts questioned if the pledged $30 billion in new liquidity was enough to calm markets for long.