JPMorgan Chase Buys Washington Mutual The federal government seized Washington Mutual on Thursday in the largest federal bank failure in U.S. history. The assets of the nation's largest savings and loan were sold to JPMorgan Chase for nearly $2 billion. The deal averts taxpayers receiving a bill for the rescue of another failing institution.
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JPMorgan Chase Buys Washington Mutual

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JPMorgan Chase Buys Washington Mutual

JPMorgan Chase Buys Washington Mutual

JPMorgan Chase Buys Washington Mutual

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STEVE INSKEEP, Host:

It's Morning Edition from NPR News. I'm Steve Inskeep.

LINDA WERTHEIMER, Host:

And I'm Linda Wertheimer. Good morning. Americans wake up this morning to more dramatic news about the financial bailout. That big meeting between President Bush, the presidential candidates and congressional leaders blew up yesterday. Negotiations continue today, and this morning, both President Bush and Senate Democrats said they expect to get a deal done. Still, there's news of more trouble in the economy. The nation's largest savings-&-loan has failed. The government's seized Washington Mutual, and much of the company will now be sold to JPMorgan Chase. NPR's Jim Zarroli joins me now. Jim, this is being called the largest bank failure in U.S. history. Can you remind us how this company got into so much trouble?

JIM ZARROLI: Washington Mutual was another casualty of the mortgage downturn. It did a lot of mortgage lending especially in California and Florida, which, as you probably know, are sort of ground zero in the foreclosure crisis. The Office of Thrift Supervision, which regulates the banks, said it lost than $6 billion in the last three quarters, and that was bad enough, but then in the past week or 10 days or so, something else had happened. There's been so much turmoil on Wall Street that customers have been pulling money out of the bank, about $16 billion since, I think, September 15th, which is about nine percent of Washington Mutual's total deposits, as of June 30th. So, the government figured, you know, it had to step in, so that's what it did.

WERTHEIMER: Washington Mutual, we should keep in mind, is a retail bank. It has customers that have deposits. What happens to them?

ZARROLI: Well, the government says it's reopening today as usual. It will just have new owners. They say it will be a seamless transition. Customers won't even know anything is different, and because the bank is being purchased by JPMorgan Chase, the customers' deposits will be protected. The regulators are just trying to do what they always do in situations like this, which is just convince people things are normal, so there isn't a run on the bank.

WERTHEIMER: Why does JPMorgan Chase step in on this one? Why take over a troubled bank like this one?