How Does the WaMu Failure Compare?

It was announced Thursday, after-hours, that the FDIC is taking control of Washington Mutual (WM) and selling its deposits as well a number of branches to JP Morgan (JPM) for $1.9 billion.

Losing $6.3 billion in the last three quarters and getting cut to "junk" status didn't give WM many options to choose from. $19 billion in losses is projected through 2011, but some say the number could be as high as $30 billion.

Currently, WM has approximately $309.7 billion in assets, $227 billion in real estate loans and $181.9 billion in customer deposits. Additionally, there are 2,239 branches and 43,198 employees who work at WM. This acquisition now makes JP Morgan nearly similar in size with Citigroup (C).

10 largest bank failures in U.S. History:

1. Continental Illinois National Bank and Trust, Chicago (1984)
Total assets: $40.0 billion

2. First Republic Bank, Dallas (1988)
Total assets: $32.5 billion

3. IndyMac Bank, Pasadena, Calif. (2008)
Total assets: $32 billion

4. American S&LA, Stockton, Calif. (1988)
Total assets: $30.2 billion

5. Bank of New England, Boston (1991)
Total assets: $21.7 billion

6. MCorp, Dallas (1989)
Total assets: $18.5 billion

7. Gibraltar Savings, Simi Valley, Calif. (1989)
Total assets: $15.1 billion

8. First City Bancorporation, Houston (1988)
Total assets: $13.0 billion

9. Homefed Bank, San Diego (1992)
Total assets: $12.2 billion

10. Southeast Bank, Miami (1991)
Total assets: $11.0 billion

This makes Washington Mutual’s failure 8X larger than the largest bank failure in U.S. history and larger than all top 10 banks combined!

Did Killinger Lie?

In a January 30 article titled, “Future bright, says Washington Mutual CEO Kerry Killinger”, Former CEO Killinger announced that WM will open 100 to 150 new bank branches in 2008.

(That’s not going to happen)

He also expected to “add more than 1 million net checking accounts this year, and that all the company’s business divisions will focus on selling products through the branches and the retail Web site “like never before”.

(I’m sure this never happened before!)

“Killinger also emphasized that WaMu has plenty of cash and access to funding to get through the fiscal year.”

(Notice a pattern from all the failed CEOs this year?)

Killinger’s compensation from 2004-2007:

Year, CEO, Cash Salary Stock, Other Pay, Total Pay

2007 Kerry K. Killinger $1,000,000, $3,468,625, $4,468,625

2006 Kerry K. Killinger $5,100,000, $17,153,715, $22,253,715

2005 Kerry K. Killinger $4,600,000, $8,876,608, $13,476,608

2004 Kerry K. Killinger $2,900,000, $12,335,416, $15,235,416

Great job Killinger…way to KILL Washington Mutual.

We should see an Indymac-related type of run today at Washington Mutual retail banking centers. If I had money at WaMu, that's what I would do, 6:00AM, just to get in line first. I wouldn’t take any chances with what I’ve seen so far this year.

Disclosure: None.

Comments

[User 270539:]

well there were many lies about this company and now they say your money is safe, so now decide if your money is safe

2008 Sep 26 10:05 AM

[Vigga:]

I mean, that's all well and good... but the fact is that nearly 100 years of banking history support the idea that if deposit bases remained unflinching (as they should in face of an FDIC which could, for intents and purposes just print money) then bank runs wouldn't bring down the WaMu's and such of the last century. It's classic herd mentality that drives these runs on assets: in this case WaMu already had a buyer, and had plenty of help lined up for weeks, but 17B in deposit withdrawals forced the Fed hand. I just think articles that end like the one above help to perpetuate the problem.

2008 Sep 26 11:12 AM

[billspaced:]

Can just ANYBODY write articles here? The author seems surprised about Killinger's statements earlier in the year, and he's downright got the bank-run idea wrong:

You get your money out of a bank before you think it won't be accessible. WM was purchased by JPM; nothing will change but the signs on the banks, months from now.

This author is pretty reckless, not to mention stupid. Learn some history about banking.

2008 Sep 26 11:37 AM

[Urbane Gori...:]

I bank at Wamu and figured this was a pretty good possibility early this week. The market price was indicating that someone knew something. My account is below the $100K limit, so I didn't see any point in running around frantically trying to move my money elsewhere. I'm not sure why the author would rush down to withdraw his account.

And by chance, I drove by the local branch on my way to my morning coffee... Guess what.. No lines at 8:30 AM... Actually, no-one was there.

Maybe Paulson and Bernanke really are calming the waters. Course, after the Democrats pretty much agreed to Bush's request, it would have been nice if his own party had not tried to stuff the bill with tax cuts and oddities.... It also would have been nice if McCain hadn't declared the bill 'dead on arrival'. I expect a possible future President to act with more aplomb. Perhaps he just wanted to tack on a proviso or two of his own as well... Maybe new carpet and heated toilet seats in the Republican bathrooms.

jegan ;-)

2008 Sep 26 01:44 PM

[John C. Lee:]

lol...well if your pissed and have taken this too serious, then you can get a laugh at my blog :)

2008 Sep 26 02:09 PM

[ntb:]

WAMU's demise came about by a run on the bank - yes. This run was caused by the government. I have a source at a major WAMU depositor (major real estate owner with all rental income running through WAMU) that was told by the FED to transfer all of their accounts to another bank. The deal to close WAMU was completed a few weeks ago and this "run" was not market based and is being used for politcal purposes.

Behind closed door meetings, secret deals, insider information being given to selected parties - government gone extemely bad.

2008 Sep 26 02:30 PM

[Cramer fan:]

Take your money out of wamu now? You stupid idiot, the bank was just taken over by the most stable bank in the nation. If its not safe under JP Morgan, why dont you just take all your money out of every institution out there. That's even smarter.

2008 Sep 26 11:46 PM

[Dr Jones:]

Although JP Morgan-Chase may experience some exposure, depending upon how deep housing prices continue to fall, They accomplish something that would have cost them more... and taken decades to accomplish. JP Morgan-Chase has been looking seriously into taking a substantial foothold in the far west and southeastern U.S. This acquisition give them 2,200+ branches in both of those geographic areas... and without having to suffer through the 'diaper stage." Five years from now when everything settles down, (hopefully) Jamie Dimon will be considered a financial wizzard... I wonder how often he talks with the Oracle of Omaha?... Dr. Jones

2008 Sep 27 10:43 AM

[John C. Lee:]

Let me clear something up, WM customers actually withdrew $16.7 billion in the 10-days leading up to the LEH failure and that "run" triggered the failure. Perhaps, we should focus on current customer withdraw patterns for problem banks. Those with over $100,000 should give some consideration in transferring the non-FDIC insured portion to another account. Not saying anything will happen, but it's the smartest thing to do in this environment of financial consolidation, no matter what your opinion is.

2008 Sep 27 05:18 PM

[Kinabalu:]

"We should see an Indymac-related type of run today at Washington Mutual retail banking centers. If I had money at WaMu, that's what I would do"

I have a $140K CD at WM (2 names) that will continue at the great stated rate. Why should I join the lemmings?

John Egan

I agree on the Republican reaction to the original proposal but if you think Obama has a better idea on how to handle the credit crisis than McCain you're kidding yourself. Neither has any idea of what's going on.

2008 Sep 28 08:18 PM

[John C. Lee:]

then who should run for president if we dont have any other choice?

2008 Sep 29 12:05 AM

[Kinabalu:]

Well, if you are a one-issue voter, and the credit crisis is your issue, there was only one satisfactory candidate in either party, Mitt Romney.

2008 Oct 03 01:23 AM