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.

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