Another domino down, WaMu is acquired
Wake up and good morning. We knew it was coming eventually, but it's never easy to see the Biggest Banking Collapse in U.S. History plastered across the front page of today's Wall Street Journal. This just isn't the financial industry's heyday as Washington Mutual, or WaMu, a Washington State savings institution with more than 40 branches in the Tampa Bay area and over 250 statewide to rank No. 5 in size in Florida, was pushed late Thursday by federal regulators into the arms of JPMorgan Chase. Here's how the Federal Deposit Insurance Corp. explains it. For depositors, this is a win win because WaMu was not "failed" first by the FDIC so all deposits -- regardless of size -- are protected in this transaction. "For all depositors and other customers of Washington Mutual Bank, this is simply a combination of two banks," said FDIC Chairman Sheila C. Bair. "For bank customers, it will be a seamless transition. There will be no interruption in services and bank customers should expect business as usual come Friday morning."
The deal is important because WaMu is one of the few big financial problem institutions waiting to be resolved amid, so far, stalemated efforts in the nation's capital to get a $700-billion Wall Street/mortgage industry bailout under way. WaMu was a distraction. But no longer. It's kind of funny. In the late 1980s and early 1990s, Chase Bank (what is now JPMorgan Chase) tried to push into the Tampa Bay area with retail branches by buying failed local banks. And the company has taken plenty of subsidies from the state to create jobs here, not always with a good conclusion. Now the bank is back -- whether this was its intention or not!
Will the Wall Street megabailout, once it kicks in, actually help people stay in their homes or let smaller banks get rid of some of their bad loans? That's a hot topic. A Wall Street Journal article today notes that executives at some small banks like Bradenton's Freedom Bank are optimistic that they would be able to sell assets to the government as well. Freedom has been trying to raise up to $25-million in capital to cover expected losses. "Any amount of help is better than nothing," said Freedom Bank CEO David Zeurn, Pennsylvania's former secretary of banking. "It doesn't have to be every loan we have." (Freedom, not to be confused with another bank called Freedom Bank in St. Petersburg, has a "zero star" ranking in health, making it among the weakest in the state.) As the Journal story explains, it's unclear whether the rescue plan would provide a mechanism for banks like Freedom to participate. Much of the focus has been on mortgage-backed securities, not on the so-called whole loans that reside on the books of smaller lenders.
Finally, for those of you wondering if the smackdown between Spain and Tampa's Odyssey Marine Exploration treasure hunters is making headway, the simple answer is: Nope. This week Odyssey denied Spanish government claims that it "secretly" scoured the ocean floor to find a wreck containing a $500-million haul of colonial-era coins. "Odyssey in this case followed all the appropriate archaeological and legal protocols," said Odyssey CEO Greg Stemm, calling allegations to the contrary false and "inflammatory."
-- Robert Trigaux, Times Business Columnist