The toll at the Wall Street continues to rise as the regulators on Thursday seized the 119-year-old Washington Mutual and sold its banking operations to JPMorgan Chase, even as the US administration continues debate on the $700-billion bailout package.
Washington Mutual, popularly known as WaMu, became the latest casualty of the ongoing financial crisis which saw the collapse of the fourth largest investment bank in US Lehman Brothers and prompted the government to bailout other entities including Freddie Mac, Fanny Mae and Insurance giant AIG.
After closure of operations of WaMu, which has an asset-base of $307 billion, the federal regulator Federal Deposit Insurance Corporation sold its banking operations for around $1.9 billion to JPMorgan Chase.
The banking failure comes soon after the breakdown of talks between the Presidential candidates and the present US President George Bush to work out a compromise on the $700-billion bailout package.
The meeting failed with Republicans denouncing the strategy as ill-conceived and Democrats accusing the other party of non-cooperation.
Meanwhile, the Bank of England announced an additional $10 billion currency swap facility to increase liquidity in the money market.
This takes the total amount allocated by the central banks of various developed nations to neutralise the impact of the current global credit crisis to $290 billion.
With the acquisition of WaMu's banking operation JPMorgan Chase would become the largest depository institution of the US with over $900 billion of customer deposits.
The WaMu acquisition would create second-largest branch network for JPMorgan Chase, reaching 42 per cent of US population and also expand its consumer branch network into the states of California, Florida and Washington.
"This deal makes excellent strategic sense for our company and shareholders. Our people have worked hard to build strong franchise and balance sheet, making the compelling transaction possible," JPMorgan Chairman and CEO Jamie Dimon said.
However, JPMorgan would not be acquiring any assets or liabilities of the banks' parent holding company (WM) or the holding company's non-bank subsidiaries.
Amid the uncertainty over the bailout plan, the Federal Open Market Committee has authorised a $10 billion increase in its temporary swap facility with the ECB and a $3 billion hike in its facility with the Swiss National Bank, a Federal Reserve statement said.
These expanded facilities would support provision of US dollar liquidity in amounts of up to $120 billion by the ECB and up to $30 billion by the Swiss National Bank.
These operations are designed to address funding pressures over quarter-end, while the Central banks continue to work together closely and are prepared to take further steps as needed to address the ongoing crisis.
Besides, the meeting called by President Bush to discuss the plan to bailout financial system with Democrat Presidential candidate Barack Obama and his Republican counterpart John McCain had failed on Thursday night.
As per reports, it was unclear whether the breakdown marked beginning of the end for the rescue effort, or merely a tumultuous interlude on way to approving a federal bailout that many within Congress consider unpalatable but unavoidable.
