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WORLD> America
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Washington Mutual closed in largest US bank failure
(Agencies)
Updated: 2008-09-26 10:18 It also follows more than a week of sale talks in which Washington Mutual attracted interest from several suitors. These included Banco Santander SA, Citigroup Inc, HSBC Holdings Plc, Toronto-Dominion Bank and Wells Fargo & Co, as well as private equity firms Blackstone Group LP and Carlyle Group, people familiar with the situation said. Less than three weeks ago, Washington Mutual ousted Chief Executive Kerry Killinger, who drove the thrift's growth as well as its expansion in subprime and other risky mortgages, and replaced him with Alan Fishman, the former chief executive of Brooklyn, New York's Independence Community Bank Corp. The transaction also appears to be a costly defeat for David Bonderman and his private equity firm TPG Inc, the lead investor in a $7 billion capital raise by the thrift in April. TPG was unavailable for comment. Washington Mutual's roughly $227 billion book of real estate loans put the thrift at the top of the critical list of US lenders, analysts said. More than half of this portfolio was in home equity loans and in adjustable-rate mortgages and subprime mortgages that are now considered risky. Thursday's transaction makes JPMorgan close in size to Citigroup, now the largest US bank by assets. JPMorgan has surpassed Bank of America in size. That bank would become the largest US bank once it completes its planned purchase of Merrill Lynch, expected in the first quarter of 2009. Dimon Pounces
Once a golden child at Citigroup before his mentor Sanford "Sandy" Weill engineered his ouster in 1998, Dimon has carved for himself something of a role as a Wall Street savior. Dimon joined JPMorgan in 2004 after selling his Bank One Corp to the bank for $56.9 billion, and became chief executive at the end of 2005. While results have been hurt by the credit crisis, JPMorgan has suffered less than many rivals. Some historians see parallels between him and the legendary financier John Pierpont Morgan, who ran J.P. Morgan & Co and was credited with intervening to end a banking panic in 1907. Bank of America Chief Executive Kenneth Lewis has also been credited with helping reduce damage on Wall Street with his acquisitions this year of Merrill Lynch and Countrywide Financial Corp, the nation's largest mortgage lender. Washington Mutual has a major presence in California and Florida, two of the states hardest hit by the housing crisis. It also has a big presence in the New York City area. The thrift amassed $6.3 billion of losses in the nine months ended June 30. It had also projected $19 billion of mortgage losses through 2011, but analysts said credit losses could reach as high as $30 billion. "It is surprising that it has hung on for as long as it has," said Nancy Bush, an analyst at NAB Research LLC. |
