(29 September 2008 – USA) Washington Mutual has been closed by the US Government and promptly purchased by JPMorgan for US$1.9 billion ($2.3 billion).JPMorgan Chase acquired the banking operations of Washington Mutual Bank in a transaction facilitated by the Federal Deposit Insurance Corporation (FDIC).
With the addition of about US$188 billion (A$225 billion) in deposits at Washington Mutual, the acquisition creates the largest US depository institution, with more than US$900 billion in customer deposits.
The deal, which is effective immediately, also creates America’s second-largest branch network, with locations reaching 42 percent of the US population.
JPMorgan Chase acquired the assets, assumed the qualified financial contracts and made a payment of $1.9 billion. Claims by equity, subordinated and senior debt holders were not acquired.
JPMorgan Chase expects to incur pre-tax merger costs of some US$1.5 billion, while achieving annual pre-tax cost savings of approximately US$1.5 billion by 2010.
The US government needed to find a buyer for Washington Mutual because a takeover by the Federal Deposit Insurance Corporation would have dealt a crushing blow to the government’s deposit insurance fund, the New York Times reported.
Earlier this year, the banking giant also took over Bear Stearns for just US$1 billion (A$1.2 billion) and has stepped in once again to prevent a total failure.