WASHINGTON (Dow Jones)–Washington Mutual (WM) customers withdrew $16.7 billion in cash from the thrift in the past nine days, a huge outflow that led to the largest bank failure in U.S. history, the institution’s regulator said Friday.
The withdrawals were largely concentrated among retail deposits that were over the Federal Deposit Insurance Corp’s $100,000 insurance cap, said Tim Ward, the Office of Thrift Supervision’s deputy director for examinations, supervisions and consumer protection.
Speaking during a conference call with reporters, Ward and other officials from the OTS, Washington Mutual’s government regulator, provided a glimpse into the last days of the thrift’s life.
Washington Mutual is the 13th U.S. bank to fail this year and the ninth to fail since July.
The bank, which started in 1889 and survived the Great Depression, typically has regulatory officials on site throughout the year because of its size. In recent weeks those regulators were providing daily reports, and “monitoring liquidity throughout each day,” said John Reich, director of OTS.
Washington Mutual, known widely as WaMu, was the largest federal savings bank under the office’s supervision. Washington Mutual and a Utah-based subsidiary had combined assets of $307 billion and total deposits of $188 billion.
The past several weeks were marked by a full-time effort to keep the institution alive, Reich said.
After a few days of bidding this week, JP Morgan Chase & Co. bested other potential buyers to takeover the institution’s assets and qualified financial contracts for $1.9 billion. The deal was made public Thursday night.
The FDIC facilitated the transaction and its insurance fund was spared from having to shoulder any costs related to the failure. “The fact that its struggles have been resolved without a hit to the FDIC is a major victory,” Reich said.
The failure of WaMu marks the latest upheaval in a financial crisis that has claimed some of largest names in Wall Street in recent months, including government bailouts of insurer American International Group Inc. (AIG) and mortgage giants Fannie Mae (FNM) and Freddie Mac (FRE).
Prior to WaMu, the largest U.S. bank to fail was Continental Illinois National Bank & Trust Co., which had $40 billion in assets when it was rescued during the savings and loan crisis of the 1980s. Continental Illinois was the first bank considered “too big to fail” by regulators.
Reich speculated there would have been more bidders for WaMu had potential buyers not been so distracted by a contested $700 billion government plan aimed at stabilizing the financial sector by purchasing bad mortgage assets from financial institutions. The future of that plan is still unclear.
“Everybody has had an eye on that at the same time they were looking at considering making a bid on WaMu,” Reich said.
Assessments charged to WaMu represented 12% of the OTS budget, Reich said. He said the office already has drafted a balanced budget for 2009 absent the collections from WAMU.
Meena Thiruvengadam, Dow Jones Newswires, MarketWatch