WaMu Fails. First major comercial bank to go.

http://online.wsj.com/article/SB122238415586576687.html?mod=special_page_campaign2008_mostpop

by newt0311 • 18 years ago

62 72 18 years ago

online.wsj.com

m0digital• 18 years ago

I had Chase when I lived in Chicago and when I moved out to SF there weren't any branches so I got Wamu. Sad to see Wamu go. I wonder what will happen to my awesome savings account interest rates.

amrithk• 18 years ago

The branches are being acquired by Chase. Perhaps the interest rates may be similar to what Chase offers.

Shooter2• 18 years ago

In Chicago, WaMu had much better business rates than Chase. I used Chase for some personal accounts because of ATMs, but WaMu for several business accounts.

dkokelley2• 18 years ago

Perhaps the interest rates may be similar to what Chase offers

Ouch, I hope not. Regular savings accounts are getting 0.10% - 1.95% depending on the type of account and balance. Compare to Wamu's 4% APY

Shooter2• 18 years ago

I have a few WaMu accounts, and I just received several emails from them offering me a higher APY (4%) and 'holiday savings starting now' right before I clicked over to HN and saw this post. I've never gotten a promotional email from WaMu before, and then I suddenly get four in one day?! At first I thought it was a phishing scheme, but they're all legit emails.

It also seems like AIG has increased their advertising for certain business units AFTER their recent plummet...

I shudder to think about taxpayer money being used for new marketing campaigns to "bolster confidence."

dkokelley2• 18 years ago

I actually have their savings account that earns me 4% APY. When I got it I earned 5%, and last month it was at only 3.75%. I'm planning on leaving it there under JPMorgan's rule unless they offer me less.

From my reading (because I can't call it research yet), WaMu's fall was triggered/multiplied by a lot of withdrawals from their customers because of fears that this would happen (chicken/egg). In fact, $19 billion was supposedly withdrawn over the past few weeks, which put them under their loan ratio (banks must maintain a certain cash/loans ratio). Of course it now makes sense that they offer such a great interest rate - they needed the money!

My concern now is what will happen to my interest rate?

jrockway• 18 years ago

Chase's savings accounts are about 0.25% around here, so you'll probably get that. I recommend moving to ING Direct or similar.

gaika• 18 years ago

Check more financial news at http://www.newmogul.com/ , founded by nickb.

tptacek• 18 years ago

You can call them the "first major commercial bank to go", as if they're the ominous start of a trend --- and maybe they are, but weren't they also basically one of the ringleaders of the mortgage valuation debacle?

Notice also (if you're a tea-leaf reader) that the WSJ and NYT stories on WaMu didn't end with "raises new and troubling questions" about some other big financial; WaMu was a festering infected band-aid waiting to be ripped off our carcass, just like Lehman. Is there another big one? Wachovia is the next-most exposed company, aren't they? And they're considered pretty strong.

kqr2• 18 years ago

http://www.nytimes.com/2008/09/26/business/26wamu.html?_r=2&...

The coolest part is that the CEO who has been on the job for LESS than 3 weeks will get paid $19.1 million.

From the article:

The company’s new chief executive, Alan H. Fishman, was in midair, flying from New York to Seattle at the time the deal was finally brokered, according to people briefed on the situation. Mr. Fishman, who has been on the job for less than three weeks, is eligible for $11.6 million in cash severance and will get to keep his $7.5 million signing bonus

dcurtis• 18 years ago

$7.5 million signing bonus? What kind of board of directors would approve such a retarded amount?

The guy would have taken the CEO job without the bonus; it serves zero purpose to the shareholders to give him $7.5 million.

Why don't companies base executive compensation on performance? Doesn't that seem logical?

witten• 18 years ago

It seems logical, but the problem with basing executive compensation on company performance is that, in a public company, it just incentivizes the executives to chase quarterly profits at the expense of medium- to long-term goals. This means that executives will do anything they can to pump up quarterly numbers, especially if they know that their tenure at the helm of their company is fairly finite.

nazgulnarsil• 18 years ago

the problem of choosing a good leader hasn't been solved by humans yet.

wschroter• 18 years ago

Why is it so hard to figure out that certain executives command a certain pay? If Wamu paid less, they wouldn't get the guy they are looking for. It's supply and demand. There are a certain number of top executives when it comes to these searches. Just like top athletes or actors. It's not like these Boards are arbitrarily picking someone from the mail room and giving them $19m.

jm4• 18 years ago

In China these people would be executed. If I remember correctly that's what happened to the CEO of the company that made all that bad pet food. I'm not saying we need to gather a lynch mob or anything, but we certainly need some kind of balance between that and the fake outrage we have in this country. I don't think jail time would be unreasonable for executives that, through gross negligence, run economy-critical businesses into the ground.

HeyLaughingBoy2• 18 years ago

The kind of board of directors who know what the rest of the market is paying? If you want a certain caliber of employee of any kind, you have to lure them with at least what they'd get elsewhere. It only seems out of joint because the dollar amounts are higher than in (e.g.,) software, but it's the same principle.

MaysonL• 18 years ago

What kind of board of directors would approve such a retarded amount?

A board of directors in a state of panic. Note that Mr Fishman was serving as Chairman at the third largest mortgage brokerage in the country (who do commercial, industrial and multi-unit residential deals - not sub-prime stuff) - not the type of job to leave for a company about to go under without big incentives.

vaksel2• 18 years ago

well maybe the guy will have some honor and will do what the AIG ceo did and refuse the golden parachute

jcromartie4• 18 years ago

I know it's probably a stretch to ask this, but: is there a Republican in the house?! Can you please explain to me how it is even remotely morally OK to pay people this much money to do what basically amounts to jack shit?

davidw• 18 years ago

Because the shareholders, the owners of the company, are free to piss away their money as they so choose.

I think there is an argument to be made for better, more transparent corporate governance rules, that would make it easier for the shareholders to say "uh, no" to stuff like this, but it's ultimately their money.

(BTW, I am not a Republican).

anamax3• 18 years ago

What does Republican have to do with it?

Look at who gets the money from Wall Street. Why? Big biz loves regulation that it can control. (When buying and selling is regulated, regulators are the first thing that will be bought and sold.)

FWIW, Sen Clinton does very well but Sen Obama is clearly at the top of the class. In three years, he got more from Fannie and Freddie than Clinton did in 8 and almost as much as Kerry did in 20. The highest 20 year total is Dodd, but Obama would have passed him by the end of his full term as Senator.

Meanwhile, Barney Frank is still out there arguing that we should be giving mortages to folks who can't pay them.

spon• 18 years ago

I'm a former Republican, and I used to say two things: (1) it's none of our business whether a private citizen is earning $10 or $10,000,000; (2) supply and demand produces, over the long run, an optimal distribution of resources, because a society's needs (i.e. for goods and services) and abilities (i.e. the ability to provide those goods and services) need to be matched in a way that reflects the actual priorities of that society.

It's hard -- probably impossible -- to justify Wall Street compensation packages on supply-and-demand grounds. In the 70s, CEOs earned about 30 times the earnings of their workers. By 2007, they earned 344 times the average pay of their workers.

CEOs do not provide 10 times the value they produced in the 70s. They are not 10 times more scarce. Corporations are not 10 times more profitable. They are not 10 times more prosperous by any measure -- if they were, they would offer 10 times more compensation, on average, to everyone at their company.

So if I were still a Republican, I'd probably say something like this: banks like Bear Stearns were irrational, and they should pay the consequences. The fewer bad banks we have, the better it is for all of us in the long run.

I don't know how many Republicans would agree with that last bit. Truth be told, most of them aren't even pro-free-trade. They're just anti-socialist. Anything that sounds like socialism sends them running for the hills. "Supply and demand" are useful to them only as a cudgel with which to attack the socialist view.

And this sort of justification is trumpeted only by the educated, Wall-Street-Journal-reading elite of the Republican party. Their popular support base in rural areas couldn't care less about economic issues.

copenja3• 18 years ago

Honestly, I don't see why the compensation a private company gives it's CEO is an issue of morality.

jcromartie4• 18 years ago

That's $159,166 an hour.

tlrobinson2• 18 years ago

They didn't expect to fail, at least not so quickly (but then again, I'm not much of a conspiracy theorist)

It's certainly possible Fishman will decline to take some or all of the compensation, like one of the other failed institution's CEO (can't remember which now)

vaksel2• 18 years ago

wonder if they'll freeze the home equity lines

dhimes2• 18 years ago

Ours was frozen by Citi.

mattmaroon• 18 years ago

I just opened up a savings account and a checking account there yesterday. Hope the FDIC gives me my $10 back.

tlrobinson2• 18 years ago

My WaMu account currently has a whopping $4.84 in it ;)

But in all seriousness, the FDIC arranged for JP to buy WaMu's deposits so they won't have to dip into (i.e. severely deplete) the FDIC insurance fund. Your WaMu account will just end up a Chase account in a few weeks/months.

Just logged in my account and got this message:

http://www.chase.com/welcomewamu/

floozyspeak• 18 years ago

Seems to send the message its ok to go bankrupt cause the gov will bail you out, so wth, lets do it!

ars5• 18 years ago

OK for who? It's not OK for the bank of the shareholders - they lost everything! The customers don't really care.

So OK for who?

steveplace3• 18 years ago

Just to let everyone know, Wells Fargo is the only bank in the U.S. that still holds an "Aaa" rating.

LogicHoleFlaw• 18 years ago

I just have to say... I love my credit union.

steveplace3• 18 years ago

Some credit unions are having issues as well.

smakz• 18 years ago

Yup, just pray it doesn't get rapidly downgraded like wamu, lehman, bears, AIG, etc.

steveplace3• 18 years ago

I doubt it. It's been outperforming its sector since july.

There might be other financial institutions to get downgraded, but WFC will be in the back of the line.

apstuff• 18 years ago

"Integrity is not a commodity. It’s the most rare and precious of personal attributes. It is the core of a person’s and a company’s reputation." -- Dick Kovacevich, Chairman of Wells Fargo

Reuters: AIG's ex-CEO refuses $22 million severance payout. Have faith all. The core of the United States will persist.

JesseAldridge• 18 years ago

Good grief. Are we looking at another Great Depression here?

I ask seriously. I don't know much about this economics jibber jabber, but I know that I sure have been seeing a lot of bad news lately...

Retric• 18 years ago

No, a few rich people lost a lot of money and are looking for a helping hand by the US gov. but these company's are a small fraction of the US economy. In the end it's not vary important what the rich do as depressions are mostly about how the middle class react when things start to get bad.

HeyLaughingBoy2• 18 years ago

/me wonders if this is a good time to start analyzing bank stocks to find a good buy...

thomasmallen3• 18 years ago

And if other banks look like they'll fold, expect the government to throw more money at the problem than just FDIC insurance dough. A GOVERNMENT CANNOT CONTROL THE FREE MARKET. IT WILL ALWAYS FAIL. It's like a drunk trying to stay on the road who overcompensates for every mistake until he zooms into a ditch.

Bad lenders and dim-witted/confused borrowers screw one another? Then dilute the dollar. "Borrow" a trillion fucking dollars that you don't have to sedate the market. Oh, that one will work great. I say, just let it be, before this thing spirals out of control. That $700B would do plenty to alleviate poverty for anyone who is, in fact, financially ruined by failing lenders.

We'll let the entrenched poor rot for decades, but bail out the rich in a week. I'm outright disgusted.

What can be done? I heard there was a small protest in NYC yesterday, maybe we'll have one in DC.

ars5• 18 years ago

You are very very badly informed!

The bailout will mean a 100% loss for all the "rich" people. It's the "poor" that will win - they borrowed money, and don't have to pay it back.

thomasmallen3• 18 years ago

And you're very shortsighted! As are many people who believe that throwing money at the problem is the answer.

This will just allow these unscrupulous lenders to maintain business as usual (assuming the companies are re-sold a few years down the road, which is the plan). That $700B will have to come from somewhere, and that place is nowhere. This may be disastrous for the economy.

And you misquoted me, leaving off "entrenched" in "entrenched poor." If you can buy a house, I have news for you, you are not a member of the entrenched poor. The middle and lower-middle classes were able to buy real estate like never before, and they will be bailed out.

Why, I ask, is rescuing new homeowners a priority now, when the third-world poverty of the inner city and rust-belt country is viewed as some incurable ailment? We know damn well why: Because this coincides with saving the bankers' asses.

WaMu Fails. First major comercial bank to go.

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