WaMu Assets Sold to JPMorgan in Record Bank Failure

By Ari Levy and Elizabeth Hester

Sept. 26 -- Washington Mutual Inc. was seized by government regulators and its branches and assets sold to JPMorgan Chase & Co. in the biggest U.S. bank failure in history.

WaMu became ``unsound'' after customers withdrew $16.7 billion since Sept. 16, the Office of Thrift Supervision said yesterday. Branches are open today and depositors have full access to their accounts, Sheila Bair, chairman of the Federal Deposit Insurance Corp., said.

The failure of WaMu, which has $188 billion in deposits, ratchets up pressure on lawmakers to piece together a rescue package for the nation's financial system. The government's inability yesterday to reach agreement on a bailout and the seizure of the biggest savings and loan sparked a sell-off of bank stocks, led by a 27 percent tumble in Wachovia Corp.

``We are going to see a lot more bank failures before the cycle is all over,'' said Brian Horey, president of Aurelian Management LLC in New York, which had bet on a decline in Washington Mutual before a ban on such so-called short sales was imposed. ``There are sufficiently large clusters of bad assets on a fair range of banks out there.''

Wachovia, the biggest seller of option adjustable-rate mortgages, slumped $3.70 to $10 in composite trading on the New York Stock Exchange. National City Corp., Ohio's largest bank, fell 26 percent, while Citigroup Inc., the biggest U.S. bank by assets, rose 3.8 percent.

Different Model

Kristen Baird Adams, a spokeswoman for National City, said the bank has ``an entirely different business model'' than WaMu. Wachovia's Christy Phillips-Brown said the bank ``continued to operate well relative to our competition.''

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 Sept. 8 and replaced him with Alan Fishman, who was awarded a $7.5 million signing bonus and $1 million salary.

JPMorgan Chief Executive Officer Jamie Dimon declined to comment on Fishman's pay on a conference call with reporters today. Fishman is an employee of the bank-holding company, which isn't being acquired, he said.

JPMorgan will make a $1.9 billion payment to the FDIC as part of the acquisition, which makes the company the biggest U.S. bank by deposits.