Daily Aid 14: Washington Mutual fails, seized by OTS and FDIC, bought by JP Morgan

Special Announcement Edition

You’ll probably just wake up to this blog post, since it’s very early morning, 12:30 AM.

Washington Mutual (ticker: WM) has failed due to a massive run on the bank, losing $16.7 billion in deposits in just 9 days.

As of 10 PM September 26, Office of Thrift Supervision seized Washington Mutual and placed it into receivership with the FDIC, making it the largest bank failure in history.

JP Morgan (ticker: JPM) then purchased the assets of Washington Mutual for $1.9 billion.

What does this mean for you?

If you are a Washington Mutual banking customer with deposits at Washington Mutual, your local bank branch will be open for business today and your cash deposits are 100% safe. Not a single penny of deposits was lost.

If you have invested in Washington Mutual stocks and bonds, your investments are unfortunately no longer worth anything.

If you have federal student loans or private student loans with Washington Mutual, those loans are now owned by JP Morgan. Make sure you contact customer service at the number on your Washington Mutual student loan bill to ensure that your correct mailing address and other contact information is up to date, so when JP Morgan assumes administration of your loan, your payments will be received correctly.

Commentary

The long term consequences of Washington Mutual’s failure and OTS/FDIC seizure will not become clear for some time, but in the meantime, it’s really important for me to emphasize these two points:

1. If you have deposited money at a bank and your money is in an FDIC insured account and you are under the $100,000 limit, your money is safe. The same limits are true of credit unions; they’re insured by the NCUA for the same limits. The FDIC has insured and guaranteed every penny deposited at all FDIC member banks, which is virtually every bank in the United States.

2. If you happen to be a CEO, president, or owner of a company, make sure your payroll is within FDIC limits. Businesses got very lucky with Washington Mutual, as JP Morgan will guarantee all deposits, regardless of amount. The next bank failure, you may not be so lucky.

Finally, if you are saving for college or retirement, consult your financial planner sooner rather than later to make sure your investments are diversified and updated to reflect the ever-changing realities of the market. As always, I am not a financial planner or investment professional; please get your investing advice from someone who is!

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