Rebel Traders Posted: September 25, 2008 at 10:44 pm by Chuck
When it rains it pours, and tonight we are in a monsoon.
[...]Thursday evening, Washington Mutual was closed by the Office of Thrift Supervision and the FDIC named receiver. WaMu customers with questions should call their normal banking representative, service center, 1-800-788-7000 or visit www.WaMU.com. The FDIC's consumer hotline is 1-877-ASK-FDIC (1-877-275-3342) or visit www.fdic.gov.
All of the deposits and assets of Washington Mutual are being immediately purchased by JP Morgan (JPM). All branches of Washington Mutual reportedly will open tomorrow as normal, but under control of the FDIC during the transfer to JP Morgan.
In a statement issued by JP Morgan, they will be closing approximately 10% of the Washington Mutual branches. Additionally, JP Morgan will have a total of $1.4 Trillion in mortgage assets on their books (editorial comment: just in time for Jamie Dimon to unload the bad stuff onto the taxpayers).
JP Morgan will need to raise cash to facilitate the acquisition of Washington Mutual's assets, and announced that they will sell $8 Billion of common stock in a capital raising effort.
Other highlights of the JP Morgan conference call:
JP MORGAN SEES A $1.2B PRETAX WRITEDOWN ON FANNIE AND FREDDIE; JP MORGAN SEES $400M IN PRETAX AUCTION-RATE DEBT BUYBACK COSTS - JP Morgan will have $1.4T in mortgages. - JP Morgan expects to add $400M to Q3 credit loss allowance; Expects $600M for Q3 credit allowance in retail finance. - JP Morgan expects $3B-$3.5B in LBO and mortgages losses. - JP Morgan expects its investment bank to make a profit in Q3. - JP Morgan acquires $176B of WaMu's home loans (In JP Morgan's press release it noted that it will be marking down the acquired loan portfolio by approximately $31 billion) - JP Morgan to assume $296B in assets from WaMu. - JP Morgan says its Tier 1 Capital ratio will be 8.3% v 9.1% in Q2
- Excluded from the transaction are the senior unsecured debt, subordinated debt, and preferred stock of Washington Mutual's banks.
- JPMorgan Chase will not be acquiring any assets or liabilities of the banks' parent holding company (WM) or the holding company's non-bank subsidiaries.
The other big story tonight is the battle over the bail-out bill. A new version of the bill has been drafted by House Republicans that would rely on mortgage insurance, and place more of the responsibility of the cost on Wall Street, instead of the tax payer.
Late night meetings in Washington are ongoing.
The S&P futures have dropped 16 points at the time of this writing, on the news of the bank failure and the disputes over the bail-out bill. In a statement tonight by Representative Sherman, the White House will NOT approve the bill if it includes limits on CEO pay and/or mortgage bankruptcy reform.
Additional companies have been added to the "no short' list:
http://blog.rebeltraders.net/2008/09/25/market-summary-fdic-takes-control-of -washington-mutual/
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