Withdrawals by customers ultimately sank WaMu: OTS

[inanna]

Source: MarketWatch

WASHINGTON (MarketWatch) -- Washington Mutual customers withdrew $16.7 billion in cash from the thrift in the past nine days, a huge outflow that led to the largest bank failure in U.S. history, the institution's regulator said Friday.

The withdrawals were largely concentrated among retail deposits that were over the Federal Deposit Insurance Corp's $100,000 insurance cap, said Tim Ward, the Office of Thrift Supervision's deputy director for examinations, supervisions and consumer protection.

Speaking during a conference call with reporters, Ward and other officials from the OTS, Washington Mutual's government regulator, provided a glimpse into the last days of the thrift's life.

Washington Mutual is the 13th U.S. bank to fail this year and the ninth to fail since July.

Read more: http://www.marketwatch.com/news/story/withdrawals-customers-ultimately-sank-wamu/story.aspx?guid=%7B7F09D20B-7B91-48F1-98D6-E92F47C73FA7%7D&dist=hpts

---

Blaming the customers? Cute.

[David__77]

1. Unrestrained capitalism is the problem.

Markets need firm macroeconomic guidance from the state.

[Hugin]

2. It's the ABM excuse...

Anything, But, Management.

[fascisthunter]

3. keep it up big WHIGS

[kirby]

4. It is true - a run on the bank developed...

When everyone panics and pulls their money out it causes the bank holdings to fall below the legal requirements and the FDIC has to take over.

However, in this case, since the amount over $100,000 is not insured, I can understand those with more than $100,000 not wanting to be at risk. Personally, I think the FDIC needs to increase that limit.

They wanted to increase it in 2001 so that it automatically adjusted for inflation, but Greenspan opposed it.

If for example they had started indexing to inflation in 1974, when the coverage limit was $40,000, the current limit would be about $135,000, the agency says.

http://findarticles.com/p/articles/mi_qn4182/is_20010517/ai_n10146426/print

[kenny blankenship]

6. There are about 6.8 Trillion in deposits, over 4 Trillion are in accts under 100K

making them insured. The FDIC has only 53 billion in assets to insure over 4 trillion in potential liabilities. Among all the US banks there is only around 250 billion in cash.

How then when the FDIC is already inadequate to the task of insuring existing accts do you increase the FDIC limit of 100,000 per acct? All you can do at this point to meet the obligations the FDIC is likely to have to pay out on, is to print more Treasuries, give them to the FDIC, and promise the world that the American taxpayer someday will be good for it.

6.8 trillion in deposits. 250 billion in cash. I hear the music starting...

[kirby]

9. Insured accounts are the foundation of our banking system...

It is probably the most progressive consumer protections there is. Without it, faith in basic banking fails, and that is a disaster. Actually, at this point, the FDIC funding is adequate but they are going to increase the premiums banks pay. It was able to get JPChase to absorb WaMu which saved the FDIC 30 billion. The FDIC has a line of credit with the Treasury and can borrow money too. You dont want people putting their money in their mattresses. Just ask people whose homes are wiped out in a natural disaster or fire how helpful that is.

[defendandprotect]

10. They are not intended to cover successive banks failing . . . ..

nor ALL banks failing ---

nor corruption of entire system ---

[kirby]

12. That very very true! But if you dont make people whole who

are putting their money in non-risky accounts, then that is huge problem.

[defendandprotect]

14. Prevention is key...and missing in this scenario --

Comments by another poster ...

Why help bail them out in any way?

The whole purpose of the bailout is to save the asses of the private bankers who own the Federal Reserve. The Federal Reserve is neither "Federal," because it's not a government agency but a private for-profit business, nor "Reserve," because it has no money in it.

The Federal Reserve uses us citizens as collateral for producing money out of thin air and then charges us interest on it. If all the banks collapse, so will the Federal Reserve and its grip on our lives. The Federal Reserve has created this crisis. If it sinks, there will be no debtors left on our mortgages -- we'll own our homes free and clear. And that is definitely NOT what the big financial players want. Also, we'll make our own local currencies and economies -- and the rise of this kind of activity during the Depression is what alarmed the big financial players the most and spurred The New Deal.

Now the Treasury Department has sold most of WaMu, including my home loan, at a bargain-basement price to Chase. Why at bargain basement price? Did WaMu's collapse cause my mortgage's balance to decrease, my interest rate to be lowered or my monthly payments to decrease? And why to Chase? Was WaMu in debt to Chase? Shouldn't the assets like mine have gone into the receivership of those to whom WaMu was in debt? Shouldn't I have been given a chance to buy my loan at a bargain-basement price?

The system is set up to keep the vast majority always in debt to a very small minority. This is what builds electronic wealth for this minority.

In the end, however, the whole ship is going down. It doesn't matter whether the bailout happens or not. This empire is imploding, as all empires do eventually. With this implosion will come our reduced pressure on the planet, a curtailment of population growth, and an opportunity like never before for us to manifest localized economies based upon the real wealth of our natural resources, not funny money.

[kirby]

18. Whoever wrote that is smoking something....

"The Federal Reserve has created this crisis. If it sinks, there will be no debtors left on our mortgages -- we'll own our homes free and clear. "

Totally absurd. Your mortgage is a contract. The contract will be assumed by someone else.

" Did WaMu's collapse cause my mortgage's balance to decrease, my interest rate to be lowered or my monthly payments to decrease? And why to Chase? Was WaMu in debt to Chase? "

WaMu was sold to chase because consumers lost faith that the bank was going to survive. People were scared they would lose their hard earned money and those, especially with deposits over $100K withdrew their money. Banks by law are required to have around 11% reserves. When people demanded cash withdrawals the cash was depleted and eventually it got so bad the FDIC was going to have to take them over. WaMu holds a lot of bad mortgage debt. The FDIC got Chase to aquire the bank good stuff and bad stuff. That saved the FDIC $30 billion (of its approx $60 billion fund). It also stuck WaMu shareholders with a huge stock loss because their CEO ruined their company.

I dont disagree that their are major structural problems, but there is a lot of misinformation out there.

[SavageDem]

22. Ah, but I agree with the idea of the OP.

Mortgages are bought and sold as securities - a contract with a promise to pay. I like the idea of private investors - me! - being able to buy back my own mortgage. There's no reason - outside of the corporate stranglehold on the market - why I couldn't. You'd just have to allow them to break up the "blocks" of mortgages into individual ones. Pay $150,000 for my $200,000 mortgage outstanding. Creditor gets some cash back on his investment, since he's going to collapse without a cash infusion. I own my own contract, cancel the obligation to myself, and call it good.

Sweet!

[kirby]

25. You are missing something...

"Pay $150,000 for my $200,000 mortgage outstanding". Ok so someone just lost $50,000. If $150,000 is the true appraisal price, that make sense. But then, "I own my own contract, cancel the obligation to myself, and call it good." Where will you get the $150,000 to buy it from, until you buy it, you do not own your own contract? To do so you will need to take out a loan but there is no money available and the market is not sure your $150,000 appraisal is accurate.

Personally I think this is what part of this bailout should be. Everyone loan bought by the Fed should be reappraised and converted to a fixed rate mortgage. Adjustable rates mortgages should be outlawed. The problem is that people whose loans are not bought up by the Fed are going to be made that someone else is getting some of their loan forgiven and rate converted.

[defendandprotect]

33. Well, that's another point .. dealing with the "mortgage crisis" would ..

have helped ---

AND as Elliot Spitzer has reminded us ... BUSH prevented the Governors - led by Spitzer --

from dealing with wild, irresponsible lending ... three years ago --

SO, FOLKS, like Sept eleven and Iraq ... this crisis was planned --

[defendandprotect]

29. There are other ways to handle this ...

It’s quite interesting how the Bush regime is creating its own panic. When the government keeps saying Chicken Little, Chicken Little, the market is going to react in a very nervous manner. It’s a reversal of what the government usually does, which is to counsel stability and patience, etc.

So, the first question Congress should ask in detailed hearings, which aren’t occurring, is simply, why is there need for a bailout? Second is, if there is a need for a bailout, why $700 billion? And third, if there is a need for a bailout, what kind of bailout? Taxpayer equity? So the taxpayer can recover if these companies make a profit, they can recover surplus, perhaps the way they did on the taxpayer bailout in 1979 with Chrysler, where Jimmy Carter demanded that Chrysler issue stock warrants to the Treasury, and Chrysler turned around, and the Treasury sold the warrants for a $400 million profit.

That's part of what Nader has said on this --

[kirby]

31. I agree with those statements... n/t

[mile18blister]

42. 700 billion is an arbitrary number

“It’s not based on any particular data point,” a Treasury spokeswoman told Forbes.com Tuesday. “We just wanted to choose a really large number.”

This is the October surprise.

[defendandprotect]

32. The FED is an interested participant ---

and basically been running the show --

It is Congress -- not the FED -- who must be making these decisions --

We don't need the FED -- it needs us --

If a contract is sold at a lesser rate, the original debtor should also be able to "assume" it --

[blossomstar]

46. You have raised some questions worthy of much more thought.

[Baby Snooks]

44. A run on the bank or an inside tip?

Wonder where all these people deposited their money? JP Morgan perhaps?

[dixiegrrrrl]

5. The economists say that every 1.00 we take out

costs the banks 10.00 because of the fractional banking process.

Ergo....our current problem.

[yy4me]

7. So now they say it is our fault? I'm darn near ready to take my

meager dollars out and bury then in my back yard.
We can't win with these guys.

[AngryOldDem]

8. I almost hate to say it, but what the hell...

...could this be that a run is exactly what the powers-that-be want, for whatever ungodly reason?

I've heard it from more than one person who heard Bush the other night say that he was dancing around that prospect pretty transparently.

I can't imagine a worse-case scenario. I'm going to sit tight on my money until I get some sense of where this bailout is going to go and then get some advice. Not that I have a king's ransom, but shit, it's all I have.

[defendandprotect]

34. The fascists in charge are profiting no matter how it's played out ---

this was certainly on Bush/Cheney agenda --- backdrop to elections --

even martial law --

Also being used to help McCain --

Assets are being traded at bargain rates as with Savings n Loan thefts and

embezzlements --

Pressures on government/"crisis" create cementing of FED/capitalit

pipeline into Treasury --

[Peggesis1]

41. Dim son actually *wants* a run at the banks...

That was my thought exactly when I heard Bush going on and on about the terrible situation. He never mentioned the FDIC insurance or offered *any* reassurance at all. He wants the country to panic. I have never had less regard for any human being ever.

[defendandprotect]

11. ..and sold to Chase at bargain basement prices . . . why?

Comments by another poster ...

Why help bail them out in any way?

The whole purpose of the bailout is to save the asses of the private bankers who own the Federal Reserve. The Federal Reserve is neither "Federal," because it's not a government agency but a private for-profit business, nor "Reserve," because it has no money in it.

The Federal Reserve uses us citizens as collateral for producing money out of thin air and then charges us interest on it. If all the banks collapse, so will the Federal Reserve and its grip on our lives. The Federal Reserve has created this crisis. If it sinks, there will be no debtors left on our mortgages -- we'll own our homes free and clear. And that is definitely NOT what the big financial players want. Also, we'll make our own local currencies and economies -- and the rise of this kind of activity during the Depression is what alarmed the big financial players the most and spurred The New Deal.

Now the Treasury Department has sold most of WaMu, including my home loan, at a bargain-basement price to Chase. Why at bargain basement price? Did WaMu's collapse cause my mortgage's balance to decrease, my interest rate to be lowered or my monthly payments to decrease? And why to Chase? Was WaMu in debt to Chase? Shouldn't the assets like mine have gone into the receivership of those to whom WaMu was in debt? Shouldn't I have been given a chance to buy my loan at a bargain-basement price?

The system is set up to keep the vast majority always in debt to a very small minority. This is what builds electronic wealth for this minority.

In the end, however, the whole ship is going down. It doesn't matter whether the bailout happens or not. This empire is imploding, as all empires do eventually. With this implosion will come our reduced pressure on the planet, a curtailment of population growth, and an opportunity like never before for us to manifest localized economies based upon the real wealth of our natural resources, not funny money.

[kirby]

13. So the FDIC would not have to absorb $30 Billion and so WaMu shareholders

suffer a moral hazards for running their company shitty. From what I have read their CEO was super aggressive at expanding branches and making crappy loans in a housing bubble market (esp California).

[defendandprotect]

15. The bank's assets did not have to be moved at "bargain basement" rates ...

This is repeating of Savings and Loan theft and embezzlements -- that's all --

We're bailing out Federal Reserve banks --- and the FED is printing the money --

and charging us INTEREST on it --

see: Wm Greider - "Secrets of the Temple"

Comments by another poster ...

Why help bail them out in any way?

The whole purpose of the bailout is to save the asses of the private bankers who own the Federal Reserve. The Federal Reserve is neither "Federal," because it's not a government agency but a private for-profit business, nor "Reserve," because it has no money in it.

The Federal Reserve uses us citizens as collateral for producing money out of thin air and then charges us interest on it. If all the banks collapse, so will the Federal Reserve and its grip on our lives. The Federal Reserve has created this crisis. If it sinks, there will be no debtors left on our mortgages -- we'll own our homes free and clear. And that is definitely NOT what the big financial players want. Also, we'll make our own local currencies and economies -- and the rise of this kind of activity during the Depression is what alarmed the big financial players the most and spurred The New Deal.

Now the Treasury Department has sold most of WaMu, including my home loan, at a bargain-basement price to Chase. Why at bargain basement price? Did WaMu's collapse cause my mortgage's balance to decrease, my interest rate to be lowered or my monthly payments to decrease? And why to Chase? Was WaMu in debt to Chase? Shouldn't the assets like mine have gone into the receivership of those to whom WaMu was in debt? Shouldn't I have been given a chance to buy my loan at a bargain-basement price?

The system is set up to keep the vast majority always in debt to a very small minority. This is what builds electronic wealth for this minority.

In the end, however, the whole ship is going down. It doesn't matter whether the bailout happens or not. This empire is imploding, as all empires do eventually. With this implosion will come our reduced pressure on the planet, a curtailment of population growth, and an opportunity like never before for us to manifest localized economies based upon the real wealth of our natural resources, not funny money.

[kirby]

21. The bank's assets did not have to be moved at "bargain basement" rates ...

The banks assets were moved in full!!! The only loss was to the shareholders by invalidating/reducing their stock to zero so that the shareholders of WaMu did not profit.I dont think one depositor has lost a penny in the process, even those with >$100K. The difference is that Chase has enough reserve cash to meet the banking regulations.

[defendandprotect]

37. The stock had gone from forty dollars to four ...

And FDIC regulations have been too kind to these banks --

[happygoluckytoyou]

16. GOP SUNK BY ANOTHER PULL-OUT... Sarah, does this remind you of 1st Dude's business partner?

[Hawkeye-X]

17. WAMU is useless

I've posted my horror story.

Hawkeye-X

[kirby]

20. Help me..

"I've posted my horror story."

Is there someway I can find this? Is there some way on DU to see posts by a specific user?

[juno jones]

19. WaMu shot itself in the foot years ago when

they bought up every credit card company they could find and jacked the rates on the customers. I'm sure they've lost thousands because people could no longer afford to pay them back.

They turned me down for a checking account at a time I had $40,000 to deposit. In hindsight, I'm so glad they did. My money (what is left of it) is safely in a CU right now.

Couldn't happen to a better bunch of assholes.

[Raine]

48. I had trouble with them too

they wouldn't let me open an account because I refused to show them a credit card. I told them to "stuff it" and I took my money to another bank where all I had to show was identification, THANK GOODNESS.

[juno jones]

49. We're the lucky ones, as much as we might have been inconvienced.

Just talked to a friend down in CA. He's just come into an inheiretance and all that money- that's supposed to be sending him off to school to finish his teaching degree- is in limbo in WaMu.

He sounds a little desparate.

And they snubbed my credit rating....HAHAHAHAHAHAH!
edit to add: My Providian CC became WaMu. They were perfectly happy to have me borrow money on it but even with that CC would not let me become a customer.


I'll say it again HAHAHAHAHAH!

[Gadzooks1]

23. We should have known...

It was the depositors' fault, for wanting their money. Absolutely not the fault of (mis)management. Ever. Nope.

[ElboRuum]

35. Welcome to DU!

:hi:

Oh, just a little word of advice. Most people around here can pick up sarcasm with little difficulty. However, some can't or just don't from time to time. From one snark to another, use the :sarcasm: smilie, you know, just to avoid painful confusion.

[SahaleArm]

24. Management over-levered and WaMu failed

Trying to blame the depositors is despicable and kind of a joke. The fractional reserve system of modern banking allows leverage on deposits. The amount of leverage should be max 4x for a bank with tight supervision from OTS or FDIC. That hasn't happened in years so banks got riskier and riskier until they collapsed.

[kirby]

26. Levergage is 11% by law, not 25%...

From the FDIC:

"Pressure on WaMu intensified in the last three months as market conditions worsened. An outflow of deposits began on September 15, 2008, totaling $16.7 billion. With insufficient liquidity to meet its obligations, WaMu was in an unsafe and unsound condition to transact business. The OTS closed the institution and appointed the Federal Deposit Insurance Corporation (FDIC) as receiver. The FDIC held the bidding process that resulted in the acquisition by JPMorgan Chase."

[bitchkitty]

27. You see, it's all our fault. n/t

[slackmaster]

28. WADR to the OTS, I think Mr. Ward is FOS on that

:nuke:

[ljm2002]

30. Sooo...

...it's a run on the bank.

Meanwhile the government is taking them over just as fast as it can -- or arranging buyouts by survivors -- to keep up appearances and avoid letting the Little People know what is really happening here.

I'm so PO'd I can barely see straight. Meanwhile, these f***ers are negotiating deals in DC with legislators, and are able to dictate that mortgage relief for the Little People is off the table, because we need a "clean bill" that "can pass quickly"...

As far as I'm concerned the only thing that should pass quickly in Congress is the entire shit-for-brains bunch of them, out the ass end.

Sorry.

[uppityperson]

36. Dang those customers for not having FAITH! (sarcasm)

I have a relative that withdrew their less than thousand dollars from WaMu earlier this week. They decided they'd rather have it in a place that they could get it out of without having to wait for feds.

[Neshanic]

38. You, you. PEOPLE! You did this to us!

[CubicleGuy]

39. I'm going to miss the WAMU commercials

Now that this bailout has been deemed to be necessary, it seems that their ad campaign of not too long ago tapped into the consumer sentiment torwards the rich, Wall Street crowd that everyone loves to hate so much. If you didn't see their commercials, they were fairly entertaining, with a bunch of rich, old bankers kept in a "corral" formed of the velvet crowd-control and queue guides that I somehow most associate with movie theaters. Anyway, they would supposedly poll this group of conventional bankers about various WAMU business policies, and to a man, the bankers would all "tut-tut" and make disparaging remarks about the policies and billing practices of WAMU, which was supposed to show how WAMU must be doing something right if so many of these old banker types disagreed with what they were doing.

Oh, well: maybe the old banker dudes had it right, after all.

[Hugabear]

40. Ironic, isn't it? The grumpy old bankers wind up buying WaMu

n/t

[Zhade]

43. That's fucking horseshit - what, people were supposed to leave their money in so they'd lose it all?

NT!

[sarcasmo]

45. I call BULLSHIT! It was in the tank prior to the customers wanting their cash.

[Doctor_J]

47. Yup, blame the little guys

It's a right-wing sport