WaMu's Downfall: No Safeguards

Includes: JPM, WMIH
by: Matthew Rafat

I have accounts with WaMu (NYSE:WM) and am happy that JPMorgan (NYSE:JPM) has taken them over. JPM's James Dimon has the respect of many investors and Wall Street, and thankfully, my deposits are safe at WaMu.

I just read this article in a legal magazine about WaMu, and it's no wonder the bank collapsed. Take a look at this story, where WaMu gave 43 loans (25 million dollars) to one couple, revealing a complete lack of safeguards or risk controls.

If the Fed is correct--that it is buying undervalued securities that will eventually increase in value when the real estate market stabilizes--then JPM would be a good buy. In effect, JPM has partnered with the Fed in its new debt issuance and stands to gain or lose like the Fed. I had considered buying JPM stock, but the stock increased 11% today. It looks like I missed the boat.