WaMu’s last days as told by executives letters to the FDIC

In the last days before WaMu was seized and sold to JP Morgan Chase in what turned out to be an immensely profitable deal for Chase, Washington Mutual executives sent a series of letters to the FDIC trying to convince them that WaMu was sufficiently capitalized and did not need intervention.

WaMu’s outflow of deposits had “moderated substantially” following the September 2008 collapse of Lehman Brothers, wrote CEO Alan Fishman and Chairman Stephen Frank in the September 24, 2008, letter to regulators. One day later, regulators took down WaMu and sold its banking operations to J.P. Morgan for $1.88 billion.

What’s more, the thrift had a plan to create $19 billion more in capital “without a penny of government assistance.”

The letter, WaMu’s last hope of survival after it failed to secure a buyer on its own, was addressed to Federal Reserve Vice Chairman Donald Kohn, Federal Deposit Insurance Corporation Chair Sheila Bair and OTS director John Reich.

The document includes a plea for leniency. A seizure “of a large, well-capitalized U.S. banking organization,” Mr. Fishman and Mr. Frank wrote, “is without precedent in U.S. history and will send a stark message to bank customers and investors. We think there is no reason to take such a dramatic step when our proposal would, quickly and simply, create $19 billion more capital for WaMu and reposition it to easily withstand the current market turmoil – all without a penny of government assistance.”

Read the entire story at WSJ.com

There appears to be some significant reason for doubt that Washington Mutual would have failed if intervention by the FDIC had not occurred.

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