The Downfall of Washington Mutual

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Case Details:

Case Code : BSTR328
Case Length : 17 Pages
Period : 2006-08
Pub Date : 2009
Teaching Note :Not Available
Organization : Washington Mutual Inc. (WaMu)
Industry : Banking & Financial Services
Countries : USA

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This case study was compiled from published sources, and is intended to be used as a basis for class discussion. It is not intended to illustrate either effective or ineffective handling of a management situation. Nor is it a primary information source.

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Introduction Contd...

Immediately after, FDIC sold WaMu Bank, (including all of its deposits, most of its loan portfolio, and its branch network, but excluding unsecured debt and equity obligations) to JPMorgan Chase & Co. (Chase) for US$ 1.9 billion. Chase re-opened the branches of WaMu Bank for business on September 26, 2008. The same day, WaMu, left with US$ 33 billion in assets and US$ 8 billion in debt, filed for Chapter 11 voluntary bankruptcy.

WaMu's failure came during a period of acute financial and economic turmoil in the US. As of late 2008, the US economy was in the grip of a recession, and the banking system in the country was under severe stress.

However, some analysts commended Chase for making the acquisition. Fitch Rating called the acquisition a "strategic positive" for Chase. Charles W. Scharf, Head, Chase Retail Banking Division, said, "We always looked at it [WaMu Bank] and we always came up with the same conclusion, at the right price, this is No. 1. At the wrong price, this could be terrible."...

Excerpts >>

7] Fitch Ratings is owned by Fimalac, S.A., an international business support services group with headquarters in Paris, France. It is a leading global rating agency mostly providing ratings for several companies in the global credit markets.
8] Eric Dash, "A Banker Embraces WaMu's Challenge," http://dealbook.blogs.nytimes.com, October 7, 2008.

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