Yesterday, without much fanfare, the largest bank failure took place in the history of the world. Washington Mutual failed yesterday and was taken over by Federal regulators. Within the same day, the Federal regulators sold the assets to JP Morgan for $1.9 billion. The Mercury News reports:
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.
So here is my question to Congress and the President – If we are on impending gloom and doom and will experience massive bank failures, how come the Washington Mutual failue was resolved with the kind of outcome that is Main Street friendly without spending $1 of taxpayer money?
In one day, the existing Federal authorities and the market resolved the largest S&L collapse with a result that seems to be exactly what is good for all of us taxpayers. That said, there were winners and loosers:
- The depositors. Their money is safe and covered by JP Morgan.
- The FDIC. No funds will be needed to cover deposits.
- The taxpayer. No taxpayer will have to assume the losses of this failure.
- The Washington Mutual Executives. Presumably, JP Morgan will no longer need their services.
- The Washington Mutual Shareholders. Shareholder took a risk in this company and lost.
Isn’t this the kind of result that Congress and the Administration is trying to get to? So help me understand this — why do we need to spend $700 billion to fix this problem? – Glenn