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12-10-2009, 04:31 PM
Why Did They Close WaMu?
by Kirsten Grind Dec 07 2009
Washington Mutual had enough money to survive. So why did regulators shut the thrift down in one of the biggest bank takeovers in history?
EDITOR'S NOTE: In September, on the first anniversary of Washington Mutual’s closure, the Puget Sound Business Journal reported that as executives fought to sell the bank during its final days, regulators undercut those efforts by signaling to bidders that the bank would soon be seized and sold at a much lower price. Now, further investigation reveals that, contrary to regulators’ assertions at the time of the seizure, WaMu had sufficient liquidity and capital to meet regulatory standards and survive. Why, then, was it shuttered?
WaMu’s regulators said they based their decision to close the bank and sell it to JPMorgan Chase on lack of liquidity—its access to ready cash—and the mounting pile of failed mortgage loans that were expected to cripple the bank’s earnings for months to come.
But new information—gathered from internal documents and interviews with scores of former WaMu executives, regulators, and other experts—shows that WaMu had plenty of cash on the day it was seized, and a regulator-vetted plan to operate with even less money if necessary.
WaMu also had ample capital—more than the regulatory levels for a “well-capitalized” bank.
Cash and Secrecy
These documents and sources, part of a Puget Sound Business Journal investigation, raise questions about whether the regulators acted precipitously in seizing a bank that could have survived, and in the process wiped out billions of dollars of wealth with widespread personal consequences.
“Someone needs to take a serious look at this because they weren’t illiquid,” said a senior federal official with direct knowledge of WaMu’s circumstances.
Regulators, the official added, “pulled the trigger too soon.”
Yet more than a year later the details of the decision remain shrouded from view. WaMu’s main regulators—the Federal Deposit Insurance Corp. and the Office of Thrift Supervision—continue to decline requests to discuss their actions, release liquidity figures, or give any other evidence that the bank was in a precarious situation that demanded immediate action. In refusing the disclosures, the regulators cite confidentiality regulations for a bank that no longer exists except in a liquidation proceeding and as a basis for numerous lawsuits.
(...)
http://www.portfolio.com/industry-news/banking-finance/2009/12/07/why-federal-regulators-closed-washington-mutual/index.html
by Kirsten Grind Dec 07 2009
Washington Mutual had enough money to survive. So why did regulators shut the thrift down in one of the biggest bank takeovers in history?
EDITOR'S NOTE: In September, on the first anniversary of Washington Mutual’s closure, the Puget Sound Business Journal reported that as executives fought to sell the bank during its final days, regulators undercut those efforts by signaling to bidders that the bank would soon be seized and sold at a much lower price. Now, further investigation reveals that, contrary to regulators’ assertions at the time of the seizure, WaMu had sufficient liquidity and capital to meet regulatory standards and survive. Why, then, was it shuttered?
WaMu’s regulators said they based their decision to close the bank and sell it to JPMorgan Chase on lack of liquidity—its access to ready cash—and the mounting pile of failed mortgage loans that were expected to cripple the bank’s earnings for months to come.
But new information—gathered from internal documents and interviews with scores of former WaMu executives, regulators, and other experts—shows that WaMu had plenty of cash on the day it was seized, and a regulator-vetted plan to operate with even less money if necessary.
WaMu also had ample capital—more than the regulatory levels for a “well-capitalized” bank.
Cash and Secrecy
These documents and sources, part of a Puget Sound Business Journal investigation, raise questions about whether the regulators acted precipitously in seizing a bank that could have survived, and in the process wiped out billions of dollars of wealth with widespread personal consequences.
“Someone needs to take a serious look at this because they weren’t illiquid,” said a senior federal official with direct knowledge of WaMu’s circumstances.
Regulators, the official added, “pulled the trigger too soon.”
Yet more than a year later the details of the decision remain shrouded from view. WaMu’s main regulators—the Federal Deposit Insurance Corp. and the Office of Thrift Supervision—continue to decline requests to discuss their actions, release liquidity figures, or give any other evidence that the bank was in a precarious situation that demanded immediate action. In refusing the disclosures, the regulators cite confidentiality regulations for a bank that no longer exists except in a liquidation proceeding and as a basis for numerous lawsuits.
(...)
http://www.portfolio.com/industry-news/banking-finance/2009/12/07/why-federal-regulators-closed-washington-mutual/index.html