CAPITOL WAMU-VE
JPMorgan Chase boss Jamie Dimon won his bid for beleaguered banking giant Washington Mutual in a takeover orchestrated by the federal government that represents the largest banking failure in history.
The takeover of the nation’s largest savings and loan will completely wipe out the company’s shareholders and saddle taxpayers with some of the bank’s toxic mortgage assets – a condition JPMorgan and other bidders insisted on before buying WaMu.
The Federal Deposit Insurance Corp. was expected to seize WaMu and simultaneously announce JPMorgan’s takeover of most of WaMu’s operations Thursday night.
Dimon has long coveted WaMu’s valuable retail banking franchise, which includes $144 billion in deposits and over 2,200 branches.
With the takeover, JPMorgan can essentially pick up those assets on the cheap, though it appears Dimon won’t get WaMu branches in New York City.
Sources familiar with the situation Thursday said that the FDIC had all but taken over WaMu’s auction process, accepting bids from several suitors including Citigroup, JPMorgan and Wells Fargo.
While details of the bids could not be learned, one source said they differed in how much of WaMu’s $227 billion book of mortgages they wanted the government to take on. As much as $30 billion of those loans are in danger of default.
WaMu CEO Alan Fishman and Goldman Sachs had been conducting their own auction in the hopes of either salvaging some value for shareholders or raising enough additional capital to continue as an independent company. But people close to the company believe that effort had been stymied by the government’s decision to run what amounts to a separate auction.
Sources familiar with WaMu said it had received interest from private-equity titans Blackstone Group and Carlyle Group as well as Texas billionaire Gerald J. Ford. The company and its advisers were also working with their current shareholders Thursday, including TPG Capital, to raise additional funds, sources said.
TPG and others that injected $7 billion into WaMu in April will be completely wiped out as a result of the takeover.
As of two weeks ago, WaMu said it had $50 billion of available liquidity and expected to end the quarter “well-capitalized.”
WaMu shares closed down 25 percent to $1.69.