> WaMuhttp://www.patenthawk.com/blog/2009/04/wamu.html
> Washington Mutual (WaMu) is a poster child of the mortgage-lending
> irrational exuberance that led to the current economic depression. A
> run on the bank last September led to its wrenching government-
> mandated rescue by JP Morgan Chase. WaMu was the biggest bank failure
> in U.S. history, and was sold in a hastily arranged wamu-bam-thank-
> you-
> man auction. WaMu is now suing the FDIC, for selling it off for only
> $1.9 billion, claiming it had no such right. Meanwhile, JP Morgan has
> filed its own suit, seeking title to disputed WaMu assets, including
> its tiny portfolio of eight patents granted and pending, as well as
> over 300 domestic and international trademarks, and 1,300 Web domain
> names. The Delaware district court judge handling WaMu's bankruptcy
> case has given WaMu permission to hire a consulting firm to valuate
> the bank's IP assets.

> Posted by Patent Hawk at April 16, 2009 10:11 PM | Patents In
> Business

> Commentshttp://wamustory.com/

> http://wamuqd.com/

> Posted by: HROLLER at April 20, 2009 2:11 PM

> On Thursday September 25th 2008, Washington Mutual Inc aka WaMu Inc.
> or WMI or WaMu, common shares trading under the symbol WM, opened at
> $2.62, rose to $2.69 within the first hour, and then fell on average
> for the rest of the day and closed at $1.69. In after hours trading
> it
> quickly dived without stopping to as low as $0.09 and then closed a
> couple hours later at $0.16. Take note it fell 90.5% just in after
> hours. During the regular day it fell 35.5%. For the entire day it
> fell 93.89%. All these percentages are based on the open, and
> excluding the pre-market trading data, which I do not have. For the
> day, the DJIA rose 196.89 points, and closed at 11,022.06

> Clearly anyone who held WaMu through the day experienced a financial
> wipeout in their position. What caused this wipeout? In a statement
> issued on the night of September 25th the Office of Thrift
> Supervision
> (OTS), an office of the US Treasury, said “An outflow of deposits
> began on September 15, 2008, totaling $16.7 billion. With
> insufficient
> liquidity to meet its obligations, WaMu was in an unsafe and unsound
> condition to transact business. The OTS closed the institution and
> appointed the Federal Deposit Insurance Corporation (FDIC) as
> receiver. The FDIC held the bidding process that resulted in the
> acquisition by JPMorgan Chase.” (link). WaMu had been sold and
> seized.
> The process of selling and seizing WaMu had actually begun prior to
> September 15th, reportedly having been started during the first week
> of September, 2008.

> Washington Mutual Inc is a bank holding company that owned two banks,
> the Washington Mutual Bank, Henderson, NV and a subsidiary of that
> bank, Washington Mutual Bank, FSB, Park City, UT. The first mentioned
> bank was the main banking operation, and the focus of everyone's
> attention. Both banks received the same treatment simultaneously on
> September 25th, 2008. For brevity they are usually referred to
> singularly as the Washington Mutual Bank aka WaMu Bank or WMB or
> WaMu.
> For the rest of this text this convention will be followed and they
> will be referred to as one enterprise and principally referring to
> the
> vastly larger Henderson NV incorporated bank.

> Seventeen days earlier on Monday September 8th, the Board of
> Washington Mutual removed CEO Kerry Killinger due to losses from
> subprime mortgages and credit card loans and replaced him with Alan
> Fishman. WaMu simultaneously announced (link) that they had
> negotiated
> a Memorandum of Understanding with the OTS concerning aspects of the
> bank’s operations. It concluded with this sentence. "The business
> plan
> will not require the company to raise capital, increase liquidity or
> make changes to the products and services it provides to customers."
> WaMu's new CEO Alan Fishman was experienced in bank mergers. In 2004
> as CEO of Independence Community Bank Corp he completed a merger with
> Staten Island Bancorp, Inc and then in 2006 he worked out the well
> executed sale of Independence Community Bank Corp to Sovereign
> Bancorp. His employment and hefty salary with WaMu were seen as an
> indication WaMu was setting itself up for a merger.

> For the ten days prior to the seizure WaMu experienced an
> acceleration
> of withdrawals, and corresponding draw downs in its liquidity, that
> the regulators at the OTS and FDIC say justified a seizure of the
> bank. The accounts that withdrew were mostly large retail accounts of
> over $100,000, which at the time was the FDIC insurance maximum.
> These
> accounts were used primarily for payroll purposes. These accounts
> were
> mostly in California, where the memory of the IndyMac bank seizure
> was
> likely on their minds. The speed and amounts withdrawn do not qualify
> as a bank run, as a bank run is a complete wipeout of deposits over a
> few days. At most it could be characterized as a walk on the bank.
> The
> withdrawals were done by electronic banking over the internet and by
> wired funds. It was not in the news, people were not lined up outside
> the bank. WaMu was the largest thrift or savings & Loan in the
> nation,
> and the sixth largest bank by deposits. They had 2,239 branches in 15
> states, concentrated in the west and south. They were large enough
> that the Federal Reserve assigned them onsite full time bank
> inspectors to monitor, among other things, liquidity levels. The
> Federal Reserve was witness from beginning to end of the liquidity
> draw down.

> A walk on a bank, is a mild form of a run on a bank. Bank runs were
> typical of the great depression which started in 1929. Customers
> wanted their cash in their hand, because if a bank died and locked
> its
> doors, their cash would be forever beyond their reach. Bank runs have
> an effect on the public and the government that tends to snowball and
> be a self fulfilling prophecy. If a new bank has a problem, because a
> bank run has happened recently, it may be happening again now, so
> they
> do a run on that bank etc. Bank runs close banks down, and draw their
> cash down to zero. A slew of bank runs that closes banks down is
> known
> as a bank panic.

> In response to the bank panics of 1929 and the early 1930's, in 1933
> the government created the Federal Deposit Insurance Corporation
> (FDIC). The FDIC is a government corporation that provides insurance
> on bank deposits. The primary reason for creating the FDIC was to
> prevent bank runs, from the demand side, depositors demanding cash
> all
> at once at the bank, which had been the typical bank run scenario in
> the depression of the early 1930's. The mechanism to do this was
> deposit insurance so that even if a bank locks its doors, your
> deposits are covered up to the insurance maximum and you will be paid
> your money from the insurance fund. At the time of the WaMu seizure
> the insurance covered up to $100,000. In large part due to the WaMu
> catastrophe the FDIC has implemented a temporary increase in the
> amount of deposit insurance, and it is now $250,000 until Dec 31,
> 2009, unless extended. The Chairman and four Board of Directors of
> the
> FDIC are all appointed by the President and confirmed by the Senate,
> with no more than three being from the same political party. The FDIC
> is self funded through its insurance premiums, which are paid by the
> banks. The FDIC has an immediate $30 billion line of credit with the
> US Treasury, and procedures are in place if more credit is needed.
> From 1996 - 2006 the FDIC waived the collection of the bank insurance
> premiums as it was at the upper limit of its legal reserves.

> The Federal Reserve system was created in 1913. One primary reason
> for
> creating the Federal Reserve was to prevent bank runs, from the
> supply
> side, the running out of cash at the bank, which had been a problem
> causing bank runs in the recession of 1907. The mechanism for doing
> this is by the banks loaning liquidity to each other in a process
> called Federal Funds, which is short for Federal Reserve Funds. Then
> there is a process of a bank borrowing straight from the Federal
> Reserve called the Discount Window. The Federal Reserve is a private
> corporation whose stockholders are the biggest banks in the country.
> The Chairman and the six Board of Governors of the Federal Reserve
> are
> all appointed by the President and confirmed by the Senate. This is
> the legal extent of the Governments involvement with the Federal
> Reserve. Thus the government has weak control over the actions of the
> Federal Reserve. All banks in America are members of the Federal
> Reserve System. All paper money is printed by the Treasury per the
> amounts ordered by the Federal Reserve. All electronic money, wires,
> credit cards, debit cards etc and all check book money, is under the
> monetary policies of the Federal Reserve. The Federal Reserve
> controls
> how much money, (cash, electronic, check book) banks have on hand
> through its regulations and membership requirements. It maintains
> this
> flexibility so that it may meet the liquidity demands of banks.

> WaMu was the largest thrift in America and part of the Federal
> Reserve
> System. WaMu had some no pay and slow pay mortgage loans, like most
> banks in America today. These loans were not an overwhelming problem
> for WaMu, as they had enough cash reserves on hand to last two years
> at the current bad loan rate.

> On March 10, 2000 the Dot Com bubble burst. The Federal Reserve began
> lowering interest rates to make borrowing more attractive, to
> stimulate the economy out of the slump caused by the Dot Com bubble
> bust. On September 11, 2001 there was the WTC-Pentagon 9-11 tragedy,
> and the Federal Reserve continued lowering interest rates to keep the
> economy moving. On July 30, 2000 the Federal Funds rate was 7.03% and
> by July 30, 2003 it was 1.03%, a drop of six points or 85.7%. The
> swing from March 2000 was probably wider, but the data older than
> July ...

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