Dedicated to Deposits: Deals, Data, and Discussion

WaMu Fails and is Acquired by JPMorgan Chase

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Chase Manhattan Bank
WaMu was closed yesterday by the Office of Thrift Supervision and the FDIC was named receiver. The FDIC then facilitated WaMu's acquisition by JPMorgan Chase. According to the FDIC's press release, the transaction protects all depositors and comes at no cost to the deposit insurance fund. From the FDIC's Q&A Guide:
No one lost any money that was deposited in Washington Mutual Bank.

If you had an account with Washington Mutual Bank, you now have an account with JPMorgan Chase Bank.

More details are available at the FDIC's Failed Bank Information page.

The big question now is what happens to our high yield accounts? Will they continue to earn the high yields? Are we allowed to make penalty-free early withdrawals from the CDs? According to this FDIC Q&A:
All interest on deposits accrued through September 25, 2008, will be paid at your same rate. JPMorgan Chase Bank will be reviewing rates and will provide further information soon.

Not only is the WaMu website still functioning, but they're still listing the 5% 12-month Online CDs. There's a link at wamu.com to Chase's own Info and FAQ page, but this page doesn't provide any additional details over what the FDIC provides. So it appears the WaMu CDs will continue at the same rate. My guess is that we'll slowly see lower rates on WaMu's online savings accounts and new CDs just like we saw at Countrywide when Bank of America took over. This acquisition looks a lot like Bank of America's acquisition of Countrywide except that the FDIC was involved in this case.

WaMu depositors came out of this easy, however, as this Seattle Times article describes "WaMu investors, for the most part, are out in the cold."

Update: More News on WaMu's Closing

Here's an explanation of why WaMu was closed from the OTS press release:
Pressure on WaMu intensified in the last three months as market conditions worsened. An outflow of deposits began on September 15, 2008, totaling $16.7 billion. With insufficient liquidity to meet its obligations, WaMu was in an unsafe and unsound condition to transact business.

I guess the CD specials and high rate savings account couldn't make up for all those withdrawals.

JPMorgan Chase's press release describes what to expect as WaMu is changed over into Chase:
The bank plans to complete most systems integrations and rebranding by year-end 2010, closing less than 10% of branches in the combined network in overlapping markets
...
Chase expects to convert Washington Mutual's consumer banking, home lending and credit card businesses to the Chase brand and technology platforms over the next two years. Chase and Washington Mutual customers should be able to access the combined network of 14,000 ATMs without fees in the coming months.

WSJ article describes the cost to Chase:
J.P. Morgan agreed to pay $1.9 billion to the government for WaMu's banking operations and will assume the loan portfolio of the thrift, which has $307 billion in assets. The full cost to J.P. Morgan will be much higher, because it plans to write down about $31 billion of the bad loans and raise $8 billion in new capital.

Here's the FDIC list of all the recent bank failures. For more info on FDIC coverage, please refer to my Facts about FDIC and NCUA post and my recent post on FDIC News, Resources and History.

Thanks to the readers who sent me news of this closure.
  Tags: Chase Manhattan Bank

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Comments
34 comments.
Comment #1 by Anonymous posted on
Anonymous
Will miss WAMU's customer service and high interest rates. Don't have much hope that Chase will continue to offer the same level of service and rates for much longer.

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Comment #2 by Anonymous posted on
Anonymous
I've had bad experiences with WaMu customer service in the past; and others have posted the same on older posts about WaMu. So, anything could be better, and definitely better than citi's CSR. The features we'll really miss are the WaMu Free Checking, because it included Free Identity Theft Services, free credit report/score, no min balances or other requirements to avoid fees, fee-free outgoing wire transfers, free checks ordered via WaMu, fee-free for non-WaMu ATMs. And, of course, the online high yield savings account linked to checking, and the competitive online CDs. Those will be missed after JPMorgan Chase completes the accounts conversions sometime in 2009 or so.

1
Comment #3 by Anonymous posted on
Anonymous
Frankly, I'm ****ed that another bank was finally done in the stupid way -- by a run. Why do people fear the security of the FDIC?

1
Comment #4 by Anonymous posted on
Anonymous
So will Chase honor WaMu's 5% CD rate after today? if I open a 5% CD today, what will happen? Thanks,

1
Comment #5 by Duck (anonymous) posted on
Duck
JP Morgan stole this, just the deposits alone not having to pay the FDIC insurance on it being able to write down the bulk of the mortgage portfolio **** wish I had 2b I would of brought it. It's going to look like reminds me of that movie Judge Dred(stupid I know) when the only resturant standing was Tacobell Our world is going to be JPM/BAC and were going to suffer for it. high prices and low savings rates. Say goodbye to competion say hello to our depression. Thanks BankingGuy for the post.

1
Comment #6 by Anonymous posted on
Anonymous
I'm with you Anon 7:14am - I may open one of the CDs today... it seems like they would have to honor the rate, because they are advertising it after the cross-over to JPMorgan Chase.

It's worth a shot, anyway. Worst-case scenario, they lower the rate (in which case they would have to allow you to withdraw penalty-free, righ?).

1
Comment #7 by Anonymous posted on
Anonymous
I was wondering the same thing about the 5% CD, so I just called WaMu and asked about the CD rate...she said even though they've merged with Chase, they're still doing business as WaMu, and that rate is still valid. She said go ahead and open it!

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Comment #8 by Anonymous posted on
Anonymous
Update: I tried applying and got "Our System is unavailable, we cannot process your application at this time." I'm not sure if that's because my credit reports are frozen, or because they've disabled new accounts.

Oh well.

1
Comment #9 by Anonymous posted on
Anonymous
I think the movie was Demolition Man....

As long as they keep advertising the rate, I'll stick with them. But I'll at least move my direct deposits back to HSBC...

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Comment #10 by Anonymous posted on
Anonymous
WaMU failure is a good thing. :-)

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Comment #11 by Anonymous posted on
Anonymous
Anon@7:59AM:

I think it might just be you. I was able to open a checking and savings account on the WaMu website earlier today.

I'd give it another shot.

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Comment #12 by Anonymous posted on
Anonymous
Will I continue to earn interest at the same rate?

JPMorgan Chase accepted Washington Mutual's interest bearing accounts including CD’s at the contract rate; therefore, they are not waving early withdrawal penalties.


so our 5% CD's should be good :)

1
Comment #13 by Anonymous posted on
Anonymous
"The features we'll really miss are the WaMu Free Checking, because it included Free Identity Theft Services, free credit report/score [...]"

I currently have a WaMu free checking account, and online savings account. How do I access the free credit report/score? I poked around on their website and used their search tool, but didn't see it anywhere.

Thanks.

1
Comment #14 by ShraZZy (anonymous) posted on
ShraZZy
What will happen to our checking account will they remain free w/ no strings attach? When I looked at the Chase checkings they have different plans but all require some kind of minimum stuff to do, and I don't want to do any of them.

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Comment #15 by Mocirne (anonymous) posted on
Mocirne
Anon @ 10:23am, I believe the free credit score is a credit card-only feature. That depressed me a little when I realized I'd be losing the credit score feature. The credit REPORT feature isn't so much a full report, just a general snapshot of your overall credit health. It also gives reasons as to why your score is what it is. Definitely will miss this bank.

1
Comment #16 by Anonymous posted on
Anonymous
For those who have tried to open an online CD and gotten an error message - this happened to us too, so I called them and was able to open it over the phone. I have to mail in my initial deposit - not as easy as online funding perhaps, but same 5% rate applies.

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Comment #17 by Anonymous posted on
Anonymous
I waited 2 months for WaMu to fail and find out who will take it over before signing up for the 5% online CD. I jumped on it last night the moment I found out it was JPMChase and before they can close the offer.

1
Comment #18 by Anonymous posted on
Anonymous
I was at a branch today and spoke to the manager. She said that the 4.25% 8 Month CD will be available at the branch until at least next Friday.

1
Comment #19 by Anonymous posted on
Anonymous
Wondering if anyone knows what happened to the common stockholders? Normally if one company buys up another they buy the common stock. But the Fed had already seized WAMU. So did the $1.9B go to the Fed? I asked my broker (who works for JP Morgan Chase) and he did not know. I know the prefered stockholders are up the creek. The common stock price dropped 90% today alone (total of over 99.9%). Dont think I will ever buy any more stocks, lost over $100K in various bank stocks so far....

1
Comment #20 by Anonymous posted on
Anonymous
I got an error when I tried to open a new CD as well. Something about not being able to verify my info based on the information I provided.

It worked Thursday. Right now, I'm locked out for 7 days. Guess what the rate after 7 days will be?

Wonder if they could reset the lock over the phone. I have some 5.5% countrywide CDs maturing 10/1.

-z

1
Comment #21 by Anonymous posted on
Anonymous
I just closed all my WAMU accounts. CSR said, "JP MORGAN will issue new checkbooks to current customers and amend all accounts to comply with the new owner banking rules".

I'm totally out.

1
Comment #22 by Anonymous posted on
Anonymous
JP Morgan Chase did not buy WAMU directly, it assumed the accounts from FDIC, therefore, all stockholder, bondholder, preferred stock holder, warrant holder and others,

ARE WIPED OUT.

JP Morgan Chase has no responsibilities to honor WAMU debt and can even write off all sub prime mortgages as loss.

1
Comment #23 by Anonymous posted on
Anonymous
JP Morgan Chase will convert most of WAMU branches to JP Morgan Chase Bank offices and will close 1/3 of not profitable branches. This will happen very fast because, JP Morgan Chase did not have to follow regular banking regulations since it assumed it from FDIC and outright now owns all of WAMU real estate.

1
Comment #24 by Anonymous posted on
Anonymous
Good morning everyone.Whoo-hoo!! It looks like sometime in 2009 or 2010 will be the time when the full conversion of Washington Mutual accounts convert into conservative JPMorgan Chase accounts.(remember, with bank mergers and acquisitions, it takes time for them to do the conversion /transition; at least 6 months upto 2 years.) Based on the welcome page at chase and wamu, WaMu customers today can continue to bank with same accounts, checks, debit cards, credit cards, deposit slips, same online banking, same places and ATMs, and same bank tellers (of course, until JPMorgan closes the branches where there is overlap, especially in NY/NJ area). As stated here and in news articles, your WaMu CD's will earn the rates as stated; and any new CD's opened at WaMu beginning Fri Spet.26,2008 will be opened at the advertised rate. The real question is: whether the acquiring bank of a failed bank has a time limit when they may change the interest rates on all its acquired deposits accounts, and whether they can change the rate after the announced acquisition?? [cuz today all account disclosures online and statement on bottom about FDIC till has Washington Mutual Bank (WMB and fsb).]

1
Comment #25 by djc314 (anonymous) posted on
djc314
do the same rules apply as past failures in that you can get out of cd's if you want? at one point I opened a 4.25 cd with WaMu and if I can get out of it and then open 5%?

1
Comment #26 by Anonymous posted on
Anonymous
I am thinking about opening a 250k 5.00 percent CD at wamu.

I believe the CD will be gone soon.

Now that it is fully backed by Chase, I fee secure.

Can anyone give me a reason not to do this??

1
Comment #27 by Anonymous posted on
Anonymous
With the current situation happening in the financial world, a supposedly strong bank can get weak in a real hurry. In the times we are in, I wouldn't chance it.

Besides, after everything that has been going on do you really believe fully in bank ratings? Or what the banks say?

1
Comment #29 by Anonymous posted on
Anonymous
"An investment in the notes involves certain risks, including business and litigation risks related to Zanett, which are described in the prospectus. These risks include the potential loss of principal invested. The notes are not bank certificates of deposit. The notes are not guaranteed or insured by the FDIC or any other entity. The notes may not be suitable for all investors. The notes are illiquid due to significant transfer restrictions and the lack of a a secondary market. Zanett has substantial senior debt that could impair its ability to repay the notes."

Not really the type of insured accounts this blog discusses...

1
Comment #30 by Dan The Man (anonymous) posted on
Dan The Man
I just opened a 10k CD (Sun. Morn) online. I grabbed the 13 month one at 5.00%. Took about 5 minutes. Smoooooth... They will send me 2 small deposit to my external account that I'm funding it with, I have to verify them and my CD will be opened.

1
Comment #31 by Anonymous posted on
Anonymous
Please withdraw your money and close your accounts.

I want my interest rates to stay high.

1
Comment #32 by Anonymous posted on
Anonymous
I am still wondering whether a 5% CD opened now (after the Chase takeover) can subsequently have the rate lowered by Chase. Anyone know?

1
Comment #33 by Anonymous posted on
Anonymous
There is some indication that Citi will not let the 5% rate pay out for an entire year.

1
Comment #34 by virgquest (anonymous) posted on
virgquest
Just spoke to a WaMu CSR about a CD I'd opened over the phone and she mentioned that the 5% 12/13 month CDs are due to end today. So if anyone else out there wants to stick $$ in WaMu/Chase, now's the time!

1