WaMu Fails, Bought By JP Morgan Chase: What Happens To My Money?

Washington Mutual was taken over by the FDIC today (Thursday). But for most account holders, there is no reason to panic.

All deposits, even those over $100,000 FDIC limits, will be taken over by JPM Chase, and are still safe. From the WSJ:

While the exact structure of the transaction wasn’t immediately known, J.P. Morgan is expected to acquire Washington Mutual’s deposits and branches, as well as other operations. The deal isn’t expected to result in any hit to the Federal Deposit Insurance Corp.’s bank-insurance fund, according to a person familiar with the arrangement. [...]

Under the deal, New York-based J.P. Morgan, which has long coveted WaMu as a way to secure a footprint on the West Coast, will assume most of the thrift’s deposits and branches, as well as some other operations.

There will be no interruption in services. Bill payments will go through, checks will clear, direct deposits will arrive, your account number stays the same, the website still works, branches will still open on Friday. From CNN:

“For bank customers, it will be a seamless transition,” said FDIC Chairman Sheila Bair. “There will be no interruption in services and bank customers should expect business as usual come Friday morning,”

Shareholders get nothing. Well, not like they had much hope anyways with the stock at less than $2 per share. I hope this is another wake up call for those that still think it’s a good idea to keep a large portion of their portfolio in their company’s stock. I don’t care if you work for GM, IBM, or Microsoft. Shares of any single company always have some risk of becoming worthless.

More details to come…
They haven’t released the official press release yet. It will be interesting to see how the interest rates will change, and if they will choose to honor outstanding CDs. Chase Bank doesn’t have the same products as WaMu did, but IndyMac still honored their existing CDs. Maybe it’s time to apply for one now? WaMu is still advertising everything like their 4% APY savings as before on their website.

Anyways, don’t panic, okay? My local branch is crowded enough as it is. I don’t need a line around the block of nervous people clamoring for their money in small bills. ;)

Update: Here is a preliminary welcome page from Chase. Nothing too much new there, no mention of interest rates changing. Still offering the same 4% APY savings and 5% CDs on the website.

Update 2: Here is the official page from FDIC.

Will I continue to earn interest at the same rate?
All interest on deposits accrued through September 25, 2008, will be paid at your same rate. JPMorgan Chase Bank will be reviewing rates and will provide further information soon.

Update 3: They updated and changed the FDIC page!. It now states:

Will I continue to earn interest at the same rate?
JPMorgan Chase accepted Washington Mutual’s interest bearing accounts including CD’s at the contract rate; therefore, they are not waiving early withdrawal penalties.

Accordingly, the 5% APY CDs should stay valid.

Comments

  1. Thanks for chiming in on this so quickly. I just turned on my computer and saw this headline on my start page: Government Seizes WaMu and Sells Some Assets. Shocking, to say the least! I really hope that their great account benefits (free checks, ATM withdrawals, and always the best online savings interest rate!) don’t change…

  2. Finally…

    I hope Chase will keep WaMu WaMu, because I really don’t like Chase and the way they do their business.

  3. *sigh* runs on banks are causing these collapses, stupid people….

  4. Doh! In the end there will only be two: Chase and Bank of America! I’m about to go the route of the credit union for the high-interest free checking – 6.01%. The rest can stay in WaMu or ChaMu or whatever it is now.

  5. Ghost – where are you getting 6.01%?

  6. With shrinking number of banks, it’s getting harder and harder to transfer balance…

  7. RIP WAMU.

    Not to be trivial, but I hope Chase keeps the free credit score tracking from Transunion that WAMU gave it’s customers. Other than cashback, that was the coolest thing any credit card ever offered me as a customer.

    Isn’t it weird for the FDIC to take over a bank on a Thursday? Don’t they usually do it on a Friday? They couldn’t wait just one more day?

  8. I have to agree about the credit score availability from WaMu – definitely cool.

    I have logins at both WaMu and Chase so it will be interesting to see how or if they combine the sytems together. Here’s to hoping everything still stays separate.

  9. > Doh! In the end there will only be two: Chase and Bank of America!

    Why don’t you take a look at the 1 yr stock price of Wells Fargo and compare it to Bank of America and JPM Chase.

    Then go check out their respective loan portfolios.

  10. If FDIC brokered WM to JPM, what actually happens to the stock? How does it even get wiped out?

  11. Hmm, I was right on time with my withdrawals :) I suppose I should close my accounts now as I don’t intend to do business with Chase.

    Anyway, it was a good run while it lasted.

    Lesson learned (to me): diversify and spread across banks even though they have different APY.

  12. The WaMu website now has a link to FAQ and press release: http://www.chase.com/welcomewamu/

  13. @askew – don’t hold your breathe. corp mergers are notoriously slow, especially the IT areas. having experienced AT&T Wireless -> Cingular -> AT&T Wireless merger, I can tell you it’s not fun.

    basically, systems will be separate for at least 3-5 years, IMHO.

  14. So much for being separate. From the new WaMu site:

    “Your branch will be re-named Chase and you’ll be re-issued new debit cards with the Chase name. Until then, bank as you do today.”

    Great… Goodbye interest rates. Looks like we’re all going to have to find a better setup with high interest savings. I find it convenient that Chase decided to wait for WaMu to collapse before they bought them out. Must have been a strategic move to save them millions, if not billions, of dollars for a buyout.

  15. As an employee we have been told business as usual this whole time so there is no reason to change. It’s not like Chase will not honor your deposits. New name on the building but still business as usual. I just cannot believe what is happening to shareholders of WaMu…I can’t wait to hear what the final ruling is there.

  16. Any other input from WaMu employees?

    Things aren’t going to change instantly. I am still in “wait and see” mode.

  17. Posted two new updates w/ links.

  18. if chase lowers interest rates significantly, i will be going to another bank. i hope chase is smarter than that.

  19. So what’s next, HSBC? This is getting out of hand and worries me.

  20. With all this bailout stuff, one politician said something very profound:

    “If it is too big to fail, it is too big to exist.”

    All this consolidation is doing nothing to address the real issues and the causes of what got us into this mess. Level 3 assets are still a gigantic crap sandwich sitting on the remain bank books. Mark-to-myth is still alive and well.

    In a free market, if an asset gets no bid, it value is ZERO.

    Will be interesting to see what the hit to FDIC’s balance will be. Still a ton of regional banks ready to go under per their exposure to commercial real estate…..the next leg to fall. (bailout or no bailout)

  21. Regarding the credit score stuff, I don’t see why not. Way back in the old days (pre-2004 era), the service was actually from Providian, which WaMu later acquired. WaMu decided to keep it around, so there’s some precedent for that sort of thing.

    Shame they failed :( I’ve enjoyed their service for the past several years, even though they don’t have any local branches where I live.

  22. SavingEverything says:

    What’s next? Who knows–how about Sovereign, Wachovia?

    “Wait and see”. It looks like JPMorgan Chase will be doing account conversions sometime next year or so. Both home pages of Chase and WaMu have a welcome link. Of course, for now, we can bank as usual at our dear loved Washington Mutual, and cherish the fee-free items, and as of September 26, 2008 the rates and bottom of webpages at the ApplyNow for their 5%-12 month online CD still states “deposits accepted by Washington Mutual Bank wmb and fsb..” . But, once JPMorgan Chase does the full conversions next year or so, these fee-free items are history. Almost all mergers of banks, the acquiring bank converts accounts to its products rather than use the bank’s it’s acquiring. Assuming there are alot of ATMs near you of WaMu or JPM-C, it appears only Chase Premier and Premier Platinum Checking accounts are needed to have 5 fee-free non-Chase ATM use, and to get free personal style checks; otherwise, expect $2 fee. I wonder if now is time to open their 5% brick-morter “traditional” WaMu 60 month CD; but, then again, interest rates may rise above that in 2-3 years from today.

  23. Tried to open 5% one year CD on line yesterday funded from Wamu checking. It got screwed up and they deposited the (external account procedure) trial amounts into Wamu checking and asked me to verify them for security reasons. The money is still in checking and it looks as though the one year 12 month 5% CD is not going to materialize. Has anyone else had this happen?

  24. SavingEverything says:

    WM (WaMu) shares closed yesterday at 1.69; pre-market trading as of 8:45AM EDT Sep 26 has price at around 0.14 to 0.16; it must have a faint heartbeat left on the NYSE.

  25. I need to know if Wells Fargo Bank is good compared to Chase/JPMorgan. How do I find out this information? I need to know where to put money that will grow safely.

  26. Welcome to Chase! Woo hoo!

  27. Mortgage Jack says:

    Nice takover of deposits for $1.9 B w/o taking on senior debts (source: Bloomberg):

    “….`This is a fabulous franchise`, JP Morgan chief executive Jamie Dimon, 52, said in an interview. `We think we got this at a price that protects us, where if we were wrong, it still protects us.`…….WaMu had about 2,300 branches and $182 billion of customer deposits at the end of June. Its $310 billion of assets dwarf those of Continental Illinois National Bank and Trust, previously the largest failed bank, which had $40 billion ($83 billion in 2008 dollars) when it was taken over in 1984…….JPMorgan said in a regulatory filing that it expects to record $1.5 billion in pretax related costs related to the purchase of WaMu’s branch network. It expects to close less than 10 percent of combined branches. The deal will 60 cents a share to JPMorgan’s 2010 earnings, and 70 cents a share in 2011, the firm added….”

    Call it “bank short-sale”, if you will…

  28. One note for high balance folks — you’ve got 6 months of >100k FDIC insurance. So you’ve got a little time to restructure things. Sigh…

    There was a thread a while back predicting WAMU’s demise based on their out of line interest rates being used to draw in more deposits and shore up the balance sheet. Unfortunately it appears we were right :(

    So, any thoughts on who’s next? I don’t immediately see another institution with rates that are way out of line relative to their competition.

  29. Jon expect that 4% rate to disappear within a month.

  30. Someone asked about HSBC. My understanding is they were bidding for WAMU, so they’re probably in reasonably good shape.

  31. Does WaMu have a lot of those bad mortgage backed securities? Something I don’t understand though — if we are going to now have a bail out — why don’t they just wait until that’s final and bail out WaMu? Does the government decide before hand who they are going to bail out? Was WaMu not on their “save” list? I don’t personally have any accounts there, but I’d just like to understand who exactly is going to be bailed out?

  32. In my home I’m WAMU he’s chase and i’ve always wanted him to come over to the other side. WAMU not only has the best online savings, free checking, free credit score checks but the customer service is the best here in Florida! I really hope this is something chase will inherit when they merge services. I’ve already begun the process of searching for an alternative so any suggestions are welcome. I will not submit to the folks that literally chase you down to run you over with their poor banking or bank of no-merica. So Jonathan can we have a I LOVE WAMU thread for venting purposes?

  33. All Balances for Chase savings accounts are 0.10% interest. I’ll be switching my money once the statements show the lower rate.

  34. @Tony, you mentioned about HSBC… Do you have any reference/news article about HSBC?

  35. Does anyone know if Chase can change the APR on the WAMU Credit Cards? I have a WAMU CC w/ 0% APR until Jan 2010, and I’d be in trouble if Chase made the 0% APR dissapear. Can they change it, or are they bound to the cardholder agreement I signed when I opened the Credit Card? I also am wondering if they Rewards System on the Credit Card will change, but am less worried about that aspect.

  36. Does Chase have a legal obligation to honor WaMu’s 5% 12-month CD rates? Can they cancel or change the interest rate or the CD itself? What are the rules when one bank buys another?

  37. They did it on a Thursday instead of Friday because they feared a run on bank on Friday if they waited one more day.

    I was pretty sure that after seeing how banks can divi up Lehman and acquires pieces for great bargains, no one will buy Wamu as a whole and take on all liabilities. The unknowns are unknowable!

    I hope the keep the high interest rates, or at least honor the rates that the CDS that have locked in.

    It’s sad how Wamu turned out although they brought it to themselves with their reckless lending.

  38. i agree with mimi why didnt they just wait it out
    or why didnt wamu sell directly to chase ?
    why does it have to be consideredn the biggest faild bank in history?

  39. From what I recall, Wells Fargo stayed out of the subprime mortgage mess altogether.

  40. RIP Wamu. I still have 4 accounts there and also my primary checking for work pay deposits.

    If Chase decides to keep that fat 4.00%APY for savings, I would actually consider moving some money back there.

  41. Looks like our Wamu CD interest rate is safe until the contract matures.

    From the FDIC web site that Jonathan provided:

    6. Will I continue to earn interest at the same rate?
    JPMorgan Chase accepted Washington Mutual’s interest bearing accounts including CD’s at the contract rate; therefore, they are not waving early withdrawal penalties.
    Back to top

    http://www.fdic.gov/bank/indiv.....l#interest

  42. RE: HSBC

    I banked with them for many years due to living both overseas & here. They were very convienient for people who travel since they are literally everywhere in the world. But some of you folks may not have a branch if you don’t live in a large city.

    My personal opinion is HSBC is safe since their main holdings are foreign. But they could just close all their US holdings if things get bad. From what I gathered, their depositors tend to be the types immune to bad borrowing/low balances.

    Credit unions are also good safety nets, depending on the housing situation in your area. If there are lots of foreclosures or high prices, then credit unions could have some bad loans in there. I’ve always been impressed with their services though.

  43. HSBC is not going to fail. Their revenue/assets/market cap is 10 times the size of WaMU. They are the 4 largest bank in the world after Citibank, BofA, and JP Morgan; They are a more globally oriented bank did not buy nearly as much MBS or derivatives that drove WAMU to the ground.

  44. twenties money says:

    Kristin just wrote an article about the same topic over at Twenties Money Magazine. I’m hoping to get some further information about this come Monday from a friend of mine. His wife worked for WaMu and has been in meetings all day about what’s going on with everything. It is really startling to see all of these major banks going down while I sit and consider how I have a small town credit union. The thought does cross my mind; “well if these major banks are falling…where does my small bank stand.”

  45. Yeah, but that cut close, huh? Imagine if JP didn’t buy it, and anything over $100k wasn’t honored. Close, very close. I took my money out of Wamu many months ago.

  46. Word on the street is that Wachovia is next

  47. I don’t feel good with my money at JP Morgan Chase.
    W/WAMU, most of us new what its outcome would be and were prepared.

    JP Morgan Chase, on the other hand does not have a reputation as being clean domestically and abroad. I don’t trust my money with this bank in the long haul and will only keep money below FDIC limits.

  48. Thanks Mike L for pointing that out that change. They should note their updates! It would appear those that 5% APY 12-month CDs are good until maturity.

  49. That’s good news that Chase is honoring WAMU’s interest rates. If they keep the rates competitive, I’ll continue doing business with them.

  50. I closed my Chase account a couple of years ago and went to Wamu. Now Wamu is Chase. Boy, I can’t even get away from this Chase company. I am deaf so I have to use relay. They won’t take relay calls so I went into the bank to complain because it is against Federal Law. He is some young punk with a chip on his shoulder, just shrugged it off and acted like he didn’t care. Well, I am still looking for a new bank and don’t know where to go, but I sure will not stay with Chase. I could have caused Chase a problem with denying my rights and all, but I rather just forgive and move on, never to return again. I feel cheated somehow I am with the company I can’t stand. It’s like we have no choice until we move our money elsewhere. I am still looking and TCF is offering a special but they have very bad reviews and is on a Fed watch list. Be careful no matter where you go. I will boycott Chase like a million dollar marathon!

  51. Does anyone know what is likely to happen to their stock now? It’s at 16 cents. Now that they’ve been bought, does it start to recover, or does it get dismantled completely?

  52. Mortgage Jack says:

    In reply to the question of what happens to Wamu stock: Chase did not take over any of the WaMu debts (secured or unsecured) – so 1.9B for the WaMu purchase will be used to pay creditors (and common stock holders are last in line), so to if safe to say that it either be worthless or close to worthless. WaMu holding company (which used to own the bank) filed for bankrupcy on Friday, so not it is up to the court to decide if and what shareholders get per share.

  53. minhhoangbi says:

    As Mortgage Jack, we should not buy Wamu stock? What should we invest now/?

  54. How quickly do you think it’ll be before Chase announces the new rate for WaMu’s old savings accounts that were earning about 4%? I’m eager to learn.

    Thanks.

  55. "New to Online Savings Accts" says:

    Anyone have comments on Everbank (4.6% 3mo/ 3.8% 1yr savings) ? Seems like a good rate for now esp. with WaMu 4% being in jeapordy.
    Any good/bad experiences?

  56. Mortgage Jack,

    Thanks for your response. I was wondering, though, now that WaMu stock is at 16 cents a share, is it the time to pick up a few shares because it can only go up in the future? Or is it going to cease to exist soon. That was really my question.

  57. SavingEverything says:

    It’s interesting to see that the next bank was Wachovia–which was the fourth largest US bank in assets!!! (but their 3rd largest brokerage remained at Wachovia). It’s quite surprising that Citibank bought them, as they too have posted $billions of losses over the past 3 quarters and writedowns of diverse loan portfolios. If I had to make wacko predictions, I’d predict Citibank, Sovereign Bank, and the owner of Countrywide Bank and Merrill Lynch. We still dont know how much bad debts and diverse loan portfolios they have to write off this quarter.

  58. I second that question about Everbank, anyone have any comments? I am planning to open a checking and savings with them because WaMu products will probably be converted to Chase products in the near future. Furthermore, I like Everbank’s whole Yield Pledge idea. I really do not like the work required to be a rate chaser, so the Yield Pledge may be my answer.

  59. Mortgage Jack says:

    Amanda:

    As predicted, WaMu stocks do not exist anymore:

    NEW YORK, Sept 23 (Reuters) – The New York Stock Exchange’s regulatory arm said on Monday that it will suspend trading in Washington Mutual (WM.N: Quote, Profile, Research, Stock Buzz) and will move to delist the shares.

    “NYSE Regulation determined that these securities are no longer suitable for trading in light of the September 25, 2008 news announcements regarding the fact that JP Morgan Chase & Co. (JPM.N: Quote, Profile, Research, Stock Buzz) has acquired all the deposits, assets, and certain liabilities of the Company’s banking operations in a transaction facilitated by the Federal Deposit Insurance Corporation (FDIC), effective immediately,” the NYSE said in a statement. (Editing by James Dalgleish)

  60. For those running away from WaMu, Citibank is now offering an “Ultimate Savings Account” at 3.50% APY.

  61. Money Making Machine says:

    I have been using EverBank for about a year now. After the introductory rate phases out you still get 2.22% on checking and 3.5% on savings. Most people have a few thousand always kicking around in their checking account so why not get a decent rate on it. I never switched over to WaMu because I was figured they would collapse soon and the rates would go away. Besides they don’t pay interest on their checking accounts. Overall the EverBank setup is the best deal out there right now.

  62. Business as usual – yeah right!
    I did a money transfer to my wamu account, only to find out 5 days later after my money did not post to my account that my account had been closed by Chase 3 days prior to this transfer without my knowledge!!
    I kept track of my account online, there was never any notification, no letter, no call – nothing! I had even sent them an online message after this buy-out asking a question, but no mention was ever made about my account being closed.
    Now I have money that is in “limbo” between both accounts and is not where I need it to be so that I can use it for an emergency.
    What bank does not notify their customers of changes? This is nuts! Is anyone else experiencing the same?

  63. Does it make sense to move some of my money (Anything exceeding FDIC limit) from countrywide to new WaMu (JPM Chase). WaMu interest rate is 4% compared to 3.5% for countrywide?

    Now that WaMu has been takenover it should be safe to open an online saving account? Am I making sense?

  64. Everbank is rated 4star **** by Bankrate.com…good rating!

  65. Chase took over Wamu then lowered customers credit limits making it look like they had maxed their cards, once they cause your card to be maxed they raised interest rates on card holders with out any real cause, People who had never been late, never missed a payment.

    They have caused millions of Americans to have a low credit scores simply by lowering credit lines down to within dollars of being maxed out, once this is done other lenders see it and they too lower your limits and so on until you do not have any available credit at all, you are then stuck with the high interest and high payments and can be forced into bankruptsy or default.

    What is really funny is that the banks cant seem to realize that if we all default on them, they will also go broke too and it will be the end of credit as we know it.

  66. What happened to all of this bail out money??, Banks received billions of dollars in rescue money, but instead of creating new financing and refinancing old high interest loans for their customers they cut available limits, lower credit scores of good paying customers and and raise their interest rates!!.
    What it the hell are these people thinking, that will kill the economy not help it, the way things are going there wont be enough people left with good credit to get a loan or mortage.

    The government needs to offer long term low interest loans directly to peope so that they can pay off their high interest debts and raise their credit scores, and become consumers again if not we are doomed!

  67. JP Morgan chase is hitting good customers with 29.9% interest rates, what kind of company would do such a thing to people who have never missed a payment or even been late?, I knew that Bank of America did such things and sparked outrage and their stock crashed to near nothing, you would think that Wamu Chase would have learned from that and avoided such moves.
    I have since learned that when a bank does this it is really trying to prop up its ballance sheet, they are expecting trouble and trying to gain all of the capital they can at the customers expense. Do they not realize that people are fed up with such crooked practices and will default on them by the thousands?, it is as if they are shooting themselves in the foot, I see their stock crashing once word gets out, this is why government regulation is needed, someone has to regulate or there is no stability,.

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  1. [...] All outstanding checks will be entertained. Online bill is going to work as usual. And as per Jonathan at Mymoneyblog.com, website account is still accessible and sees no reason for any disruption in Wamu service. “For [...]

  2. [...] WaMu Fails, Bought By JP Morgan Chase: Don’t Panic @ My Money Blog [...]

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