Friday, September 26, 2008

Why Washington Mutual (WM) Does Not Matter

From 24/7 Wall Street:
Washington Mutual (WM) failed yesterday and most of its assets where sold to JP Morgan (JPM). The price was $1.8 billion. JPM will have to write down $31 billion in badloans, but, since Jamie Dimon is now the king of the banking world, he should be able to raise the capital to cover that. In the meantime, he has picked up $307 billion in assets.

According to The Wall Street Journal, "The deal will vault J.P. Morgan into first place in nationwide deposits and greatly expand its franchise." The people who get drawn-and-quartered in the process are the WaMu bondholders and those who own the common stock. Washington Mutual shares were at over $36 a year ago. Now, they are worth nothing. About $50 billion in market cap has been destroyed....MORE