U.S. witnesses biggest banking failure; WaMu sold to JPMorgan

Washington, Sep 26 (PTI) The toll at the Wall Street
continues to rise as the regulators on Thursday seized the
119-year-old Washington Mutual and sold its banking operations
to JPMorgan Chase, even as the U.S. administration continues
debate on the USD 700-billion bailout package.

Washington Mutual, popularly known as WaMu, became the
latest casualty of the ongoing financial crisis which saw the
collapse of the fourth largest investment bank in U.S. Lehman
Brothers and prompted the government to bailout other entities
including Freddie Mac, Fanny Mae and Insurance giant A.I.G.

After closure of operations of WaMu, which has an asset-
base of USD 307 billion, the federal regulator Federal Deposit
Insurance Corporation (F.D.I.C.) sold its banking operations
for around USD 1.9 billion to JPMorgan Chase.

The banking failure comes soon after the breakdown of
talks between the Presidential candidates and the present US
President George Bush to work out a compromise on the USD
700-billion bailout package.

The meeting failed with Republicans denouncing the
strategy as ill-conceived and Democrats accusing the other
party of non-cooperation.

Meanwhile, the Bank of England announced an additional
USD 10 billion currency swap facility to increase liquidity in
the money market.

This takes the total amount allocated by the central
banks of various developed nations to neutralise the impact of
the current global credit crisis to USD 290 billion.

With the acquisition of WaMu's banking operation JPMorgan
Chase would become the largest depository institution of the
U.S. with over 900 billion dollar of customer deposits.

The WaMu acquisition would create second-largest branch
network for JPMorgan Chase, reaching 42 percent of U.S.
population and also expand its consumer branch network into
the states of California, Florida and Washington.
"This deal makes excellent strategic sense for our company
and shareholders. Our people have worked hard to build strong
franchise and balance sheet, making the compelling transaction
possible," JPMorgan Chairman and C.E.O. Jamie Dimon said.

However, JPMorgan would not be acquiring any assets or
liabilities of the banks' parent holding company (W.M.) or the
holding company's non-bank subsidiaries.

Amid the uncertainty over the bailout plan, the Federal
Open Market Committee has authorised a USD 10 billion increase
in its temporary swap facility with the E.C.B. and a USD 3
billion hike in its facility with the Swiss National Bank,
a Federal Reserve statement said.

These expanded facilities would support provision of U.S.
dollar liquidity in amounts of up to USD 120 billion by the
E.C.B. and up to USD 30 billion by the Swiss National Bank.

These operations are designed to address funding pressures
over quarter-end, while the Central banks continue to work
together closely and are prepared to take further steps as
needed to address the ongoing crisis.

Besides, the meeting called by President Bush to discuss
the plan to bailout financial system with Democrat
Presidential candidate Barack Obama and his Republican
counterpart John McCain had failed last night.

As per reports, it was unclear whether the breakdown
marked beginning of the end for the rescue effort, or merely a
tumultuous interlude on way to approving a federal bailout
that many within Congress consider unpalatable but
unavoidable.