WaMu seized, assets sold
JPMorgan Chase swoops in to buy $1.9 billion in assets from the government.

The bank’s failure is the worst in US history, and 13th financial institution to fail this year.

In what amounts to the biggest bank failure in U.S. history, beleaguered mortgage lender Washington Mutual (WM, news, msgs) was taken over by regulators late Thursday. JPMorgan Chase (JPM, news, msgs) swooped in to buy most of the thrift’s assets from the government for $1.9 billion.

The failure of WaMu came as a jolt to a financial system already struggling with doubts about the stability of large institutions.

“With insufficient liquidity to meet its obligations, WaMu was in an unsafe and unsound condition to transact business,” the Office of Thrift Supervision said on its Web site.

The losers in the deal: WaMu shareholders and private-equity firm TPG, which invested $7 billion into the bank on April 9.

JPMorgan gets WaMu’s 5,400 branches in 23 states.

“We’re in favor of what the government is doing (with the rescue plan), but we’re not relying on what the government is doing. We would’ve done it anyway,” JPMorgan Chief Executive Jamie Dimon said in a conference call Thursday.

Massive failure
Washington Mutual had been slammed by losses related to the mortgage-market crisis over the past year.

In December 2007, the bank had closed its subprime lending business, cut its dividend and announced layoffs. In an ironic twist, Washington Mutual rejected an $8-per-share offer from JPMorgan in March — but the bank continued to struggle, and the stock spiraled lower.

The thrift finally ousted its chief executive, Kerry Killinger, on Sept. 8, and was forced to put itself up for sale on Sept. 15.

JPMorgan initially expressed interest, as did Citigroup (C, news, msgs), Spain’s Banco Santander, Wells Fargo (WFC, news, msgs) and several private-equity firms, no buyers had come forward. The thrift’s customers had pulled $16.7 billion in deposits since it went on the block 10 days ago.

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