The largest bank failure in the history of the United States was successful and won't cost the taxpayers anything, said Federal Deposit Insurance Corp. Chairwoman Sheila Bair in interviews with CNBC and Bloomberg Television on Friday morning. after Washington Mutual was seized and subsequently sold to JPMorgan Chase for $1.9 billion last night.
On Thursday night, Washington Mutual was seized and subsequently sold to JPMorgan Chase for $1.9 billion.
Washington Mutual was on the radar for some time, said Bair, who noted that the timetable for the seizure was bumped up due to a potential media leak. She added that all deposits, both insured and uninsured are covered.
The news came on the heels of extraordinarily tight credit conditions in the United States as lawmakers scramble to pass legislation geared at easing financial market tensions.
The FDIC is fully behind U.S. Treasury Secretary Paulson's plan to purchase illiquid asset, said Bair. The FDIC called the transaction "simply a combination of two banks." They said claims by equity, subordinated and senior debt holders were not acquired.
The announcement came moments after Washington Mutual was closed by the Office of Thrift Supervision and the was FDIC named receiver on Thursday evening.
It was reported there will be no interruption to Washington Mutual's services and that it will be "business as usual" on Friday.
In a statement, JPMorgan Chase said they see strong capital and liquidity ratios going forward, and that the deal makes JPMorgan the largest depository in the U.S.
JPMorgan CEO Jamie Dimon said they will offer $8 billion in common stock, which could be available as early as Friday morning.
The bank said it will mark down its acquired loan portfolio by about $31 billion.
By Erik Kevin Franco
©CEP News Ltd. 2008
