The Largest Bank Failure in United States History: Washington Mutual

Business Ethics

The largest bank failure

in

United States History

(Washington Mutual)

Introduction

Washington Mutual, Inc. was a savings bank holding company and the former owner of Washington Mutual Bank, which was the United States’ largest savings and loan association until it became the largest bank failure in U.S. history.

On September 25, 2008, the United States Office of Thrift Supervision (OTS) seized Washington Mutual Bank from Washington Mutual, Inc. and placed it into the receivership of the Federal Deposit Insurance Corporation (FDIC). The OTS took the action due to the withdrawal of $16.4 billion in deposits, during a 10-day bank run (amounting to 9% of the deposits it had held on June 30, 2008). The FDIC sold the banking subsidiaries (minus unsecured debt or equity claims) to JPMorgan Chase for $1.9 billion, which re-opened the bank the next day. According to FDIC, JPMorgan didn’t acquire WaMu's liabilities, including claims by shareholders and subordinated and senior debt holders, and it received $25 billion a few weeks later as part of the taxpayer bailout of the financial services industry. The holding company, Washington Mutual, Inc. was left with $33 billion assets, and $8 billion debt, after being stripped of its banking subsidiary by the FDIC. The next day, September 26, Washington Mutual, Inc. filed for Chapter 11 voluntary bankruptcy in Delaware, where it is incorporated.

Washington Mutual Bank's closure and receivership is the largest bank failure in American financial history. Before the receivership action, it was the sixth-largest bank in the United States. According to Washington Mutual Inc.'s 2007 SEC filing, the holding company held assets valued at $327.9 billion.

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