New York (HedgeCo.Net) – JPMorgan Chase & Co. has purchased Washington Mutual’s branch network for $1.9 billion, making them the largest U.S. bank by deposits. The deal was encouraged by the U.S. government after consumers withdrew over $16 billion from the nation’s largest savings and loan in the latter half of September.
WaMu was having trouble finding a buyer after the Treasury’s proposed $700 billion bailout package created reluctance among would-be investors. Others companies said to have been considering an offer included Citigroup and Wells Fargo.
Many believed that WaMu was next in line to sink thanks to over $180 billion in outstanding mortgage-related loans and the paranoia of a pending liquidity crunch. On top of that, Standard & Poors once again cut WaMu’s ratings to CCC from BB-, though the company was quick to quell any fears associated with the downgrade.
"Washington Mutual Bank’s deposit rating from Standard & Poor’s continues to be investment grade and it is important to note that Standard & Poor’s rating actions do not affect the safety of customer deposits, which are insured up to the limits allowed by the FDIC," said WaMu in a recent statement.
Washington Mutual continued to deny rumors of any problems. The bank recently stated they had over $50 billion in liquidity despite being hit hard by the subprime mortgage fallout.
It was just a few months ago that WaMu rejected a bid from JPMorgan for about $4 a share, even after JPMorgan urged the bank to consider a deal before the economy got worse.
JPMorgan, who also acquired Bear Stearns earlier this year, will not inherit WaMu’s liabilities, including claims by shareholders and subordinated and senior debt holders. By purchasing WaMu, Chase can now increase their presence on the West Coast and in Florida.
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