They either didn't have enough cash to cover the customer demand for withdrawals or they didn't have enough capital assets to cover their investment guarantees.
Banks are required by law to maintain enough liquidity to cover a certain percentage of deposits. When they fall below that percentage, the Feds step in. On Fri, Sep 26, 2008 at 9:40 AM, Beth Fleischer <[EMAIL PROTECTED]> wrote: > ok, someone explain to me what "collapsed under the weight of its enormous > bad bets" means. Whats "collapsed" mean? > > ----- Original Message ----- > From: "Erika L. Walker" <[EMAIL PROTECTED]> > To: "cf-community" <[email protected]> > Sent: Friday, September 26, 2008 4:51 AM > Subject: No more WAMU ... > > >> http://voanews.com/english/2008-09-26-voa7.cfm >> >> *As U.S. lawmakers grappled over a $700 billion dollar bank bailout plan, >> one of the nation's largest banks - Washington Mutual Incorporated - >> collapsed under the weight of its enormous bad bets on the U.S. mortgage >> market. From Washington, VOA's Purnell Murdock reports on what is seen as >> the largest bank failure in U.S. history. >> >> *With financial markets reeling over the recent crisis on Wall Street, the >> collapse of Seattle-based Washington Mutual could not have come at a worse >> time. >> >> Federal regulators moved quickly, seizing the troubled mortgage lender >> late >> Thursday and selling the thrift's banking assets to U.S. investment bank >> J.P. Morgan for nearly $2 billion. >> >> The Federal Deposit Insurance Company (FDIC), insures Americans' bank >> deposits of up to $100,000. But it says because of the deal it will not >> have >> to use its assets to cover Washington Mutual's deposits. >> >> The FDIC had already spent billions of dollars in its takeover of IndyMac, >> which collapsed in July. Some analysts say a Washington Mutual failure >> could >> have used up half the money in the government insurance fund. >> >> J.P. Morgan Chase said it plans to close less than 10 percent of the two >> companies' branches. The bank has not yet decided which to close. Kelsey >> Wesley, a Washington Mutual employee says employees are nervous. But he >> adds >> the company, commonly known as WaMu, has been good to them in the past. >> >> "I'm not gonna say that is not gonna happen but no matter what WaMu has a >> really impressive severance package and I think that's going to be carried >> on even if there is a merger," he said. >> >> John Graybill, another Washington Mutual employee said he is optimistic. >> >> "Of course we are going to have some uncertainties and some questioning >> about what's going on. Have I been nervous? Sure. That's the nature of the >> whole beast," he said. "When a large company gets bought out you wonder >> about your job. Are heads gonna roll? You just don't know but we have >> faith >> in our bosses and the people upstairs." >> >> FDIC Chairwoman Sheila Bair says this will be a seamless transition for >> the >> bank's customers. She says there will be no interruption in services and >> bankers can expect business as usual. >> >> Washington Mutual has been saddled with billions of dollars of debt >> because >> it heavily invested in selling risky subprime mortgages to customers who >> later defaulted on them. >> >> This is J.P. Morgan's second purchase of a financial institution left >> vulnerable by the subprime mortgage crisis. It bought Bear Stearns for >> more >> than two-billion dollars earlier this year. >> >> >> > > ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~| Adobe® ColdFusion® 8 software 8 is the most important and dramatic release to date Get the Free Trial http://ad.doubleclick.net/clk;207172674;29440083;f Archive: http://www.houseoffusion.com/groups/cf-community/message.cfm/messageid:271001 Subscription: http://www.houseoffusion.com/groups/cf-community/subscribe.cfm Unsubscribe: http://www.houseoffusion.com/cf_lists/unsubscribe.cfm?user=89.70.5
