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Washington Mutual

Another Financial Storm May Be Brewing by: Jay Elias Mon Sep 15, 2008 at 04:13:18 PDT (6 pm. - promoted by ek hornbeck) Buried in the sound and fury of the current financial storm, including the bankruptcy of Lehman Brothers, sale of Merrill Lynch to Bank of America, and the rumored imminent meltdown of insurance giant A.I.G. is something which I consider far more dangerous: The alert have taken note that the failure of Washington Mutual, which looks increasingly likely, would consume the FDICs reserves and, as in the savings and loan crisis, force the agency to go hat in hand to Congress for more money. But this is comparatively early in our burgeoning banking crisis for the bulwark of commercial banks to be tested. Worse, the concern is that uninsured depositors will flee weak banks, and in process, push more over the edge. The scale of the problem? Washington Mutual - the sixth largest bank in the US - has lost more than a third of its market value recently as investors fear it lacks liquidity and capital to survive the credit crisis... The FDIC is respected for its operational effectiveness. But its $45bn deposit insurance fund is underfunded according to its own guidelines, at 1.01 per cent of insured deposits... ...analysts fear it may have to draw on its $70bn Treasury credit lines. Alan Avery, a partner at Arnold and Porter, said a single failure - if big enough - "would cause the FDIC to immediately draw on the Treasury credit". Washington Mutual had $143bn in insured deposits on June 30 - about three times the size of the deposit insurance fund, but less than half of its $307bn assets. Emphasis added. There's More... :: (37 Comments, 462 words in story)

Too Failed To Bail by: Jay Elias Sun Sep 14, 2008 at 17:35:46 PDT (10 pm. - promoted by ek hornbeck) I don't have time to even begin giving this a real analysis right now, but you need to be aware of what is happening today: In one the most extraordinary days in Wall Street's history, Merrill Lynch is near an 11th-hour deal with Bank of America to avert a deepening financial crisis while another storied securities firm, Lehman Brothers, hurtled toward liquidation, according to people briefed on the deal. The moves came after a weekend of frantic negotiations between federal officials and Wall Street executives over how to avert a downward spiral in the markets. Questions still remain about how the market will react and whether other firms may still falter like A.I.G., the large insurer, and Washington Mutual, both of whose stocks fell precipitously last week. Coming just a week after the government took control of mortgage lenders Fannie Mae and Freddie Mac, the magnitude of the industry's reshaping is staggering: two of the most powerful firms on Wall Street, Merrill Lynch and Lehman, will disappear. This is simply staggering.  In less than one year, Bear Stearns, Merrill Lynch, and Lehman Brothers will have simply disappeared.  To put that in some perspective, all three of these banks were founded before and survived the Great Depression.  The GSE nationalization is the largest nationalization since at least the Depression, and possibly in all of American history.  Another of Wall Street's most venerable partnerships, Arthur Andersen, one of the five largest accounting firms in America also disappeared during the last eight years. Someone ought to be making an attack ad right now - if this is how Republicans have governed with regards to the fortunes of Americas biggest financial firms, how can anyone in any small town or city in America believe that they will be able to make a living if they continue to govern in the future? Discuss :: (28 Comments)