Why should federal taxpayers help Washington Mutual at all?

Jon,

The reason the Feds want to prop this one up is because of the FDIC insurance. WaMu is the biggest of the banks in question.

You are forgetting the 148 billion in deposits that only have about 5% on reserve or less than 8 billion. That means the feds (taxpayers/FDIC) must come up with $140 billion just to prop up this one bank. THE FDIC DOES NOT HAVE THAT MONEY.

It makes much more sense for the Feds to guarantee another few billion in losses than the alternative.

They are doing the taxpayers a much bigger favor working this one out. If WaMu shuts down the FDIC will go down with it.

This is a major part of the reason Paulson is begging for a $700 billion backstop.

Let them fail. I am sick of all the Corporate Socialism.

The deposits are protected in custodial accounts. If the bank goes bankrupt, creditors can't seize customer assets.

I have no problem with letting Wamu the company and its executives fail and suffer the consequences of their actions. But I am unclear what happens to people who have home loans with Wamu, or people who have their savings or other investments there?

Serious question: is there some way to protect them while letting the company get its comeuppance?

LongshotX, this isn't Corporate Socialism... I am not sure where you grew up and what school you went to... but this is pure Capitalistic Greed... NOTHING to do with socialism...

Has it been socialism the people would be the one that benefited and the CEOs and CFOs would be the ones in jail w/o any money/properties left.


There is a huge problem in this country and the constant "fear" of socialism. If its not something you like, you just plainly call it that.. just like our old man McCain would call a country an enemy just because he doesn't know the country's prime minister's name.

Lets not act and say things too quickly.

This is nothing but good old capitalism... aka, greed :)

It's been suggested that WaMu hasa no one to blame other than itself. True. However, this environment of Corporate greed has been allowed to fester without any Governmental prudency, over sight and common sense. The "American Dream" has always been there but has been bastardized to allow those who cannot or will not pay their dues to realize the "Dream."

Doing nothing "is" a bailout. The taxpayers are on the hook for every bank the FDIC takes over.

The article has it's facts wrong. WM expects 3rd quarter losses of $4.5B down from $5.9B the previous quarter (The $19B and $28B quoted above is over the next 1.5 to 2 YEARS). WM has liquidity of 50B. So how exactly is WM going belly-up this week? I wish people would get their facts straight before announcing the end of the world. If the sensationalist media dropped this bone, WM would remain in business, and actually return to profitability when the economy turns around. Facts, logic, it's all I ask for. It's unfortunate the media could possibly kill this company through ignorance.

In case you want the numbers, go to the WAMU home page and look for press releases. And since they are a publicly traded company, they can't make up the numbers they are sharing in their press release.

Jonathan, your blog is very misleading! The third quarter losses at WM will be $4.5 billion, not the $19 billion that you misreported. The $19 billion number is for the projected total loss for the next 6 quarters, or 2.5 years! Please correct your blog, or you are guilty of manipulating the stock of a financial institution.

Folks: Thanks for pointing out the error in my post which I have corrected.

Washington Mutual won't fail as many small investors are guessing. The $700 billion bailout is likely to happen, and Washington Mutual will be one of the first beneficiaries of the plan. All of the bad loans on WaMu's balance sheet will be "erased" and then the company will be much more attractive for potential buyers. JP Morgan, Wells Fargo, Citigroup, and a few others are waiting like vultures to win the hand of WaMu. There will be a bidding war, and chances are great that WM current share price of $3.25 will skyrocket.

We are too close to the elections and WaMu simply cannot fail. Both WM and WB shares should explode in the next few days if all these things come to pass. I agree with the other commenter who said that this needs to be done before Friday because I also think that there will be massive withdrawals on bank accounts and huge dumping on stock before Friday close. Too many weekend "surprises" that people are afraid of.

If Berr, would take a hard look at some pertinant facts about WAMU's position in Agriculture, he might no be so ready to let WM slip away. Farmers have to borrow money too. All that grain in the Palouse of WA State does not pop out of the ground on its own. Berr, might try fasting for a week, then he might have an inclination as to what hunger is, if one of our primary Ag Banks fail. This is the "Alternative" that Berneki and Poulson have been talkimng about. Hunger in America could turn into famine, if our farmers can't plant this spring, due to no farm loans. Like most Wallstreeters, I doubt if Berr, has any idea as to what side his bread is buttered on. After all, this 7Billion dollar buyout is not just another Federal expenditure. The Feds are buying saleable assets, which in time, will no doubt bring profit to America's taxpayers. You don't have to draw me a roadmap, to realize that the USG is doing the right thing.

Because if it goes under California's economy will come to a grinding halt.

WAMU is remiss by not selling while they still can.

They are acting as if it's their own private little company and not a public one. They've already been downgraded to junk; all that's left is a run on the banks and poof, there goes 300 billion of CA money vanished into thin air.

And where are those smart investers that got in at $30-36?

Doug