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Thread: Another one bites the dust!

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    Default Another one bites the dust!

    Federal Regulators shut down Washington Mutual and firesold their assets to JPMorgan Chase for $1.8 Billion. And to think Chase almost paid $8 a share earlier this year and WaMu turned them down. Hopefully none of our members are still significant debt or equity holders in WaMu.
    Richard
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    Having been royally screwed over by WaMu when they merged with Providian---it took a LAWYER to fix my credit!---I have to say, it couldn't have happened to a more deserving pack of idiots and thieves.

    Apologies to anyone who lost money. But WaMu's been screwing people over for years.

    NANP™

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    I bank with WaMu and my mortgage is with IndyMac.
    Rick

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    No worries. If you're a customer there shouldn't be too much to worry about. You'll get new checks, cards, and online services but Chase got all the deposit accounts, loans, and branches.

    Online banking might be a pain in the butt though.
    Richard
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    I live not to far from their HQ. I have been watching for a while how these different banks have operated.

    I am of the opinion that there should be no bailout for any of these companies. This should definitely be an environment of survial of the fittest. If you look at the different companies out there, there are two types the ones that will be able to make it and those who won't. By bailing out the failing companies, the government is allowing the stupid to survive.

    In the short run it will hurt but in the long run things would be a lot better. The government will only screw things up.
    -Kyle

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    Honestly, I can see the arguement both ways. On the hand I completely agree with you that they should reap what they sow but on the other hand we've potentially got another S&L size crisis coming. I don't really have an answer. I guess we'll wait and see.
    Richard
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    Default 85/15/5 = out of business

    I try to avoid topics that could be political in nature, but I just had to comment on this. WaMu's failure is no surprise considering the large number of 85/15/5 loans they wrote.

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    IMHO, it really shows what dire straights WaMu was in that the Office of Thrift Supervision held the firesale after the market closed on a Thursday, versus their norm of Friday. 24 hours might have been too long for WaMu to survive. Crazy.
    Adam

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    We will probably end up with about 4 or 5 superbanks who will control everything :-(

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    Quote Originally Posted by rickw View Post
    I bank with WaMu and my mortgage is with IndyMac.
    I also bank with WaMu; thankfully, I've got no mortgage (at all), neither do I have any shareholder status with WaMu... just a money-market account, a CD, and my checking account... (sadly) none of 'em close to the $100K FDIC limit. But still... when I read the "breaking" story in last night's NYTimes, my sphincter was a-twitchin'.

    I hope that none of us is in an exposed position vis-a-vis WaMu. But if you are, breathe deeply... (repeatedly, and often).

    From their website (yes, I can log-in, and all my assets are "present and accounted-for"):

    About WaMu

    You'll know it right away: We're not like other banks. We've always been about making things better for people—our customers, employees and neighbors.




    Smooth saving!!
    Last edited by JBHoren; 09-26-2008 at 09:42 AM.

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    Quote Originally Posted by apswartz View Post
    We will probably end up with about 4 or 5 superbanks who will control everything :-(
    This post isn't intended to offend any of our American members so please no flames!

    You guys have about the dodgiest financial system I have ever seen.

    Instead of having controls in place to prevent substandard lending practices and the creation of worthless securities (remember Junk Bonds in the 80's), you let the "free market" feed itself into a frenzy and then when companies that have encouraged and profited hugely from these practices start to go bust, the taxpayer is expected to cough up 1 Trillian US dollars (by the time this is over it will be) to keep them afloat.

    This money would be better spent preventing situations such as these (at far less cost to the taxpayer) than fixing up companies that should simply be allowed to fail.

    Time to get off my soapbox.
    Dave - "Dave's not here man"

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    Quote Originally Posted by LexusAussie View Post
    This post isn't intended to offend any of our American members so please no flames!

    You guys have about the dodgiest financial system I have ever seen.

    Instead of having controls in place to prevent substandard lending practices and the creation of worthless securities (remember Junk Bonds in the 80's), you let the "free market" feed itself into a frenzy and then when companies that have encouraged and profited hugely from these practices start to go bust, the taxpayer is expected to cough up 1 Trillian US dollars (by the time this is over it will be) to keep them afloat.

    This money would be better spent preventing situations such as these (at far less cost to the taxpayer) than fixing up companies that should simply be allowed to fail.

    Time to get off my soapbox.
    As an American I am not the least bit offended but it must be made clear that the roots of this fiasco have nothing to do with the free market.

    Fannie Mae was created in 1938 by the US government specifically to resell high risk mortgages as an investment vehicle. It remained an agency of the US government until the late 1960's when it was privatized to remove it from the budget (Freddie Mac was created at this same time to expand the high risk mortgage resale business into the open, that is non-FHA, housing market). I've been digging over the past few weeks but so far I've not found any reference that indicates bundled mortgage securities existed as independent investment vehicles prior to 1938. These securities, as offered by Fannie and Freddie, were sold with the guarantee that the US government would cover outstanding principle in the event of a default. Even if these type of structured debt securities had developed in the free market, no such government guarantee would have supported them.

    In the first five years of this century, the Federal Reserve Bank injected dollars into the US Economy at a rate and amount unprecedented in its entire history. This drove interest rates to historically low levels. In short, money was cheap and plentiful. This 'new money' went largely into the real estate sector. While this is often credited to the Clinton and Bush administrations' aggressive pushing of banks to lend to low income buyers (and I do think this played a part), it is important to note that there were no hot running developments in other sectors at this time (as opposed to a few years prior with the internet/telecom explosion). So all in all I think real estate would have been the 'boom town' no matter what.

    Fannie and Freddie, went into overdrive with the amount of high risk loans suddenly available and the number of Mortage Backed Securities (MBS) skyrocketed. This coupled with rapid rise in the underlying real estate prices (brought on by the rapid increase in buyers) made the MBS's the most attractive investment going. With US government backing and seemingly ever-increasing hard asset values, MBS's were seen as a sure thing. Everyone wanted one.

    Then the Federal Reserve began closing the spigot in late 2005. The amount of real estate buyers began to fall accordingly and with them went the real estate prices. It took two years, but folks finally put two and two together and now no one will use a MBS to light their stoves.

    And here we are. All a bailout will do is hold these MBS's at above market value for a much longer time than would be the case if they were allowed to be liquidated and institutions involved to fail. If that were the case, we'd be done with all this in six months, a year on the outside. But any bailout will drag it on for years and years. Housing will remain unfordable, risky, overvalued investments will flourish, real savings will be less available to sound, longer term capital investment, the value of dollar will decline (and if the world strongly rejects it, hyper inflation is a real possibility) and the American public as a whole (as opposed to a relatively small segment of investors, bankers and home owners) will be significantly poorer.

    This whole mess would never have manifested itself in a market free from government intervention and the economy will certainly be better off from here if Uncle Sam just lets it be.
    Last edited by patrisVII; 09-26-2008 at 01:46 PM.
    Cogito ergo doleo

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    Quote Originally Posted by LexusAussie View Post
    Instead of having controls in place to prevent substandard lending practices and the creation of worthless securities (remember Junk Bonds in the 80's), you let the "free market" feed itself into a frenzy and then when companies that have encouraged and profited hugely from these practices start to go bust, the taxpayer is expected to cough up 1 Trillian US dollars (by the time this is over it will be) to keep them afloat.

    This money would be better spent preventing situations such as these (at far less cost to the taxpayer) than fixing up companies that should simply be allowed to fail.
    A free market approach would be to let them fail. If I lose money from poor business choices, I highly doubt I'll get a hand-out. Someone may buy whats left of my assets, but thats about it.

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    Default next up ...

    [I]"La realidad ha conocido sesgo liberal" [/I] Stephen Colbert

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    Quote Originally Posted by ctr View Post
    I try to avoid topics that could be political in nature, but I just had to comment on this. WaMu's failure is no surprise considering the large number of 85/15/5 loans they wrote.
    Um... everyone did a lot of 80/15s and 80/20s. I frankly think WaMus issues deal more with 80/15 option arms, stated, NINA, alt-a, etc.

    For instance here is one of their alt-a pools in which only 11% of the loans were full doc (basically proved income), they were only 15 months in age as of April 2008 and 20% of the pool was foreclosed or owned by the bank. This is why I called WaMus collapse a while ago.



    Anyone else see the strange humor in this ad now?
    [YOUTUBE]http://www.youtube.com/watch?v=laot_Eomr3s[/YOUTUBE]
    Last edited by AaronX; 09-26-2008 at 09:11 PM.

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