Wamu Failed, time to panic? I don’t think so…
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Time to Panic? Yes, in generally its not a good sign for any economy but if you are a Wamu customer, you are/will be just fine.
Lehman Brothers Holdings Inc. declared bankruptcy last week. And Bank of America Corp. announced it was buying Merrill Lynch. and now as we all suspected (okay lets say wall street, when I say all) WAMU is declared bankruptcy this noon. Washington Mutual customer are no more WAMU customers but they are now JPMorgan customers. It sounds like, no one is going to loose any money (including any money above FDIC insure) from their Wamu account. (Thanks god!) Also, this takeover is not going to cost any of FDIC Insurance Fund. See my recent blog post about “FDIC insurance limit and strategy” to see what is insured and what is not and limits of FDIC insured account.
By the evening , Wamu captured its position in failed bank list on FDIC website. Here is the screen snap.
Wamu Failed, Sept 25 2008
So what lesson learned?
Never exceed FDIC insurance limits. (Thanks god, things are okay in this case — Wamu failure)
Is it a good time to panic?
As per WSJ all deposits, even over $100,000 FDIC limits, will be taken care by JPM Chase. See this news snippet From the WSJ:
While the exact structure of the transaction wasn’t immediately known, J.P. Morgan is expected to acquire Washington Mutual’s deposits and branches, as well as other operations. The deal isn’t expected to result in any hit to the Federal Deposit Insurance Corp.’s bank-insurance fund, according to a person familiar with the arrangement. […]
Under the deal, New York-based J.P. Morgan, which has long coveted WaMu as a way to secure a footprint on the West Coast, will assume most of the thrift’s deposits and branches, as well as some other operations.
Wamu Whoo hoo moment
Is bank (Wamu) going to open tomorrow?
Generally in such scenario, money may not be accessible immediately but not in this case. As per CNN article, bank will open tomorrow for usual business. No change in account number. All outstanding checks will be entertained. Online bill is going to work as usual. And as per Jonathan at Mymoneyblog.com, website account is still accessible and sees no reason for any disruption in Wamu service.
“For bank customers, it will be a seamless transition,” said FDIC Chairman Sheila Bair. “There will be no interruption in services and bank customers should expect business as usual come Friday morning.”
What about my home loan with Wanu?
All mortgages and loans have been assumed by JPMorgan Chase Bank. Your Auto payment for loan is going to work as usual.
How about interest rate? Is it going to be same?
This is very interesting question. As we all know, Wamu recently increased Savings interest rate to 4%, where all peer banks are reducing interest rate. Wamu is (read was) also offering very attractive CD rates. FDIC advised that JPMorgan Chase Bank is reviewing rates and will provide further information soon. My guess is JPM is going to back down recent hike in rate.
It sounds like things are okay with Wamu failure, so who is the biggest looser?
Stockholders have the lowest priority of claim in the whole precess. In fact FDIC already advised stockholders to contact accountant and/or the IRS concerning the exact requirements necessary to recognize the investment as a loss for tax purposes.
Who should I contact for more information, if Wamu don’t pickup the phone?
You can Call 1-877-275-3342 (1-877-ASK-FDIC). FDIC extended their phone support for long hours and for this weekend. (yes, they will answer on Saturday Sept 27 and Sunday Sept 28 too!)
Update (Sept 26 2008): Chase published a webpage for WaMu customers: See Wamu Customer welcome page. Nothing new on this page as they promised to do business as usual.
Wamu Head Office, WaMu Center, Seattle, WA
Via [FDIC: WaMu Closed, No Cost to Insurance Fund @calculatedrisk.blogspot.com] and [JPMorgan Buys Failed WaMu Assets for $1.9 Billion @Cnbc.com] and [FDIC, Wamu failure FAQs web page]
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