WAMU CLOSED: SOLD TO JP MORGAN CHASE FOR $1.9 BILLION

Implications: Rumors had been swirling over the last few weeks that WAMU was shopping for a buyer, however, the OTS (the Office of Thrift Supervision) couldn't allow WAMU to continue its operations under constraints of deposit outflows exceeding $16 billion in the last week or so and JP Morgan Chase becomes the benefactor of WAMU's collapse and acquires WAMU's deposits for a low ball amount of $1.9 billion. WAMU may have staved off a collapse if the proposed $700 billion bailout plan had been approved, however, what we witnessed this week was alot of grandstanding and political posturing but no agreement to pass and legislate the proposed $700 billion bailout plan. WAMU becomes the latest news headline and the largest FDIC-insured institution on the list of bank failures in 2008. The FDIC fund wasn't impacted by WAMU's collapse, however, other S&L's and thrifts that have failed to meet their fiduciary responsibilities have only added to the downward spiral of the U.S. economy. 

Analysis: While we watched politicians from the left, the right and somewhere in the middle bicker and pose for photo opps this week, WAMU, the largest S&L collapsed under the strain of an economy that has all but choked the credit system breathless and from WAMU's risky mortgage-backed investments. With no viable buyers who could raise the capital to acquire WAMU, the OTS (the Office of Thrift Supervision) was compelled to step in and close WAMU's doors and Chase's CEO, Jamie Dimon saw this as an opportune time to acquire WAMU on the cheap, while expanding its branch and ATM operations, gain market share and move its competitive positioning ahead of its rival, Bank of America, at least for the short-term.

1.  WAMU's collapse may be indicative of what's to come in the future for the Banking Sector. Potentially, more bank failures could occur as an erosion of equity occurs and consumers' confidence to deposit funds investors willingness to invest in this sector erodes. In fact, the FDIC saw the handwriting on the wall and began calling back retirees last year to assist in receivership of bank failures that were imminent in 2007-2008 and into 2009

2.  WAMU suffered from risky investments and took a costly risk on subprime mortgages and their Mortgage Unit drug down profits and with the run on of deposit outflows exceeding $16 billion in less than two weeks, WAMU collapsed and the OTS and the FDIC facilitated the sale of WAMU to Chase for $1.9 billion

TAKEAWAY:  Chase's CEO, Jamie Dimon "Chased What Matters," acquiring WAMU on the cheap, an increase of deposits, branches, ATMs, market share and competitive positioning. "Whoo hoo!" (WAMU's tagline). Perhaps our elected officials could take a page out of Dimon's "playbook" and cease with all of the partisan politics and posturing before we read about another major financial institution's collapse.