New York - America In Crisis, Washington Mutual Could Be The Next To Collapse. FDIC Funds Dwindling
New York - The fate of Washington Mutual remained in question yesterday as federal regulators recently called a number of banks asking if they would consider buying the nation’s largest savings and loan should it eventually falter, sources told The Post.
In recent days, federal banking regulators have reached out to Wells Fargo, JPMorgan Chase, HSBC and several other financial institutions to gauge their interest in a possible acquisition of WaMu, but no merger discussions are currently under way between the Seattle-based bank and anyone else, sources said.
The move comes as investors worry that WaMu’s customers could begin pulling their money, which totals about $143 billion, out of the bank should its stock fall further.
That doesn’t appear to be happening now, but several WaMu customers in the New York area told The Post yesterday that they were worried about their cash.
“Should I be in panic mode?” asked one Brooklyn-based customer who recently bought a $250,000 13-month CD from the bank.
At the end of June, WaMu customers had 42.4 million accounts, almost all with less than the federally insured maximum of $100,000.
WaMu’s shares traded down as much as 25 percent yesterday before rallying to end the day up 16 percent to $2.32.
Standard & Poor’s cut WaMu’s credit rating to junk status late Monday citing “increasing market turmoil,” but at the same time acknowledged that WaMu’s deposit base appears to be stable and the company has enough liquidity to meet all fixed obligations through 2010.
Rumors about a pending takeover by JPMorgan also resurfaced yesterday, but sources close to both companies said no talks are happening.
WaMu’s deposits could buy the company’s new boss Alan Fishman time to seek a deal or more capital should it lose more on bad mortgages than expected.
In April, private equity giant TPG led a group of investors that pumped $7 billion into WaMu.
TPG invested a total of about $1.5 billion into the company at an average price of $8 a share, according to a letter to the firms’ investors obtained by The Post.
Those investors are unlikely to take a loss and would want JPMorgan or any other buyer to pay at least $8 a share before they accept a deal, sources said.
Banks are not the only ones struggling in the growing financial crisis. The fund established to insure their deposits is also feeling the pinch, and the taxpayer may be the lender of last resort.
The Federal Deposit Insurance Corp., whose insurance fund has slipped below the minimum target level set by Congress, could be forced to tap tax dollars through a Treasury Department loan if Washington Mutual Inc., the nation’s largest thrift, or another struggling rival fails, economists and industry analysts said.
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