WaMu: Epic Bail
Add Washington Mutual (WM) to the list of troubled financial institutions felled by the current economic crisis. Thursday night, the lender was seized by federal regulators and sold to JPMorgan Chase (JPM) for $1.9 billion in hopes of preventing further damage to the country’s hard-hit economy. Under the deal, JPMorgan will acquire all of WaMu’s banking operations, including $307 billion in assets and $188 billion in deposits. “This institution was a big question mark about the health of the deposit fund,” said Sheila Bair, chairwoman of the Federal Deposit Insurance Corporation, on a conference call yesterday. “It was unique in its size and exposure to higher risk mortgages and the distressed housing market. This is the big one that everybody was worried about.”
WaMu’s failure is historic–the largest bank bust on record. The company’s assets are equivalent to about two-thirds of those held by the 747 insolvent thrift institutions and sold off by the Resolution Trust during the S&L crisis.
With more than 20 percent of global technology spending coming from the financial industry, WaMu’s failure and the collapse of other institutions are certain to have repercussions in tech. “This is game-changing,” Gartner (IT) analyst Joanne Correia said of the economic crisis recently. “People are going to stop new software deployments. They’ll cut in the applications space. In PCs and servers, everyone will stop putting in new hardware.”
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