Washington mutual

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How WA_MU was demolished

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  • Your presentation about Wamu is very good, I need to do a research paper on almost the same thing, where did you get all the info? Do you have any references that I could go and obtain my information there? I would appreciate any thing. Thanks
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  • owner of the third-largest savings and loan in the United States, Washington Mutual, Inc. operates as the bank holding company for Washington Mutual Bank, its chief operating subsidiary, and various other financial services businesses. Included under Washington Mutual's corporate umbrella during the mid-1990s were Washington Mutual Bank fsb, a federal savings bank, Washington Mutual Life Insurance Company, a life insurance company, Murphey Favre, Inc., a securities brokerage service, and Composite Research & Management Co., an investment advisor firm. Founded in 1889, Washington Mutual registered rampant growth during the 1990s as it expanded throughout the Pacific Northwest. In 1996, the bank nearly doubled its size by acquiring Irvine, California-based American Savings Bank.On June 25, 1908, the company changed its name to Washington Savings and Loan Associationin 1917, when the country’s focus was on World War I, the company converted to a mutualsavings bank changing its name to WaMu.
  • Owner of the third-largest savings and loan in the United States, Washington Mutual, Inc. operates as the bank holding company for Washington Mutual Bank, its chief operating subsidiary, and various other financial services businesses. Included under Washington Mutual's corporate umbrella during the mid-1990s were Washington Mutual Bank fsb, a federal savings bank, Washington Mutual Life Insurance Company, a life insurance company, Murphey Favre, Inc., a securities brokerage service, and Composite Research & Management Co., an investment advisor firm. Founded in 1889, Washington Mutual registered rampant growth during the 1990s as it expanded throughout the Pacific Northwest. In 1996, the bank nearly doubled its size by acquiring Irvine, California-based American Savings Bank.
  • http://www.answers.com/topic/wmIt held liabilities in the form of deposits of $188.3 billion, and, and had subordinated debt of $7.8 billion. It held as assets, of which $52.9 billion were "option adjustable rate mortgages" (Option ARMs), with $16 billion in subprime mortgage loans, and $53.4 billion of Home Equity lines of Credit (HELOCs) and credit cards receivables of $10.6 billion. It was servicing for itself and other banks loans totaling $689.7 billion, of which $442.7 were for other banks., including $3.23 billion in payment option ARMs and $3.0 billion in subprime mortgage loan
  • Washington mutual

    1. 1. Washington Mutual<br />
    2. 2. CONTENT<br />Brief history of WaMu<br />Its business model<br />Describe the key events from the very history<br />What was the crisis? Describe<br />Impact of bank’s acquisition of Long Beach Financial in 1999, and Providian in 2005<br />The effect and dependency of FHLB funding<br />Characterize the deteriorating effect on earnings<br />Identify the events of 2007/8 which contributed significantly<br />Who was primarily responsible for the crisis?<br />What was the dollar impact of the crisis?<br />How was the crisis resolved?<br />What was the learning of the crisis?<br />What were the steps taken?<br />What is the present state? <br />2<br />
    3. 3. History Of Wa Mu <br />The Washington National Building Loan and Investment Association<br />Founded in 1889<br />third-largest savings and loan in the United States<br />Its subsidiaries:<br />Washington Mutual Bank <br />federal savings bank<br />Washington Mutual Life Insurance Company<br />Murphey Favre Inc.<br />On June 25, 1908, the company changed its name to Washington Savings and Loan Association.<br />In 1917, when the country’s focus was on World War I, the company converted to a mutual savings bank changing its name to WaMu.<br />3<br />
    4. 4. Business Model<br />4<br />
    5. 5. The key events from the very history<br />Washington Mutual expanded its assets during World War I by 68 percent.<br />WaMu installed its first computer, an IBM 1401 the size of a refrigerator with 4k of memory.<br />The bank converted from a mutual form of ownership to a capital stock savings bank on March 11, 1983.<br />From 1990 to 1996, WaMu acquired 16 smaller banks in Washington, Oregon, Utah and California.<br />WaMu company bought subprime lender Long Beach Financial in 1999.<br />WaMu purchased the formerly "subprime" credit card issuer Providian for approximately $6.5 billion in October 2005.<br />5<br />
    6. 6. Cont….<br />WaMu was beginning to shrink in terms of total assets by the end of 2005.<br />WaMu began the move into its new headquarters, WaMu Center, located in downtown Seattle.<br />By August 2006, WaMu began using the official abbreviation of “WaMu” in its branding and all but legal situations.<br />WaMu had four operating segments for management reporting purposes, by 2007 :-<br />the Retail Banking Group<br />the Card Services Group<br />the Commercial Group<br />the Home Loans Group<br />6<br />
    7. 7. What was the crisis ?<br />Nothing was done by the Fed to address the deteriorating credit conditions inside mortgage lenders for more than a year.<br />Defaults and delinquencies were rising across all classes of mortgages, that started the ripple effect that caused the collapse of New Century.<br />New Century Financial create an earthquake in the mortgage securities market.<br />7<br />
    8. 8. Impact of bank’s acquisition<br />Long Beach Financial in 1999<br />writes mortgages for people with less‐than‐stellar credit.<br />one of the more dubious lenders in the CA market<br />poor lending criteria.<br />credit diligence went out the window<br />Providian in Oct. 2005<br />credit card unit's non‐performing loan portfolio had improved significantly.<br />WaMu was beginning to shrink in terms of total assets by the end of 2005.<br />the bank already was beginning to feel increased stress from its credit book.<br />8<br />
    9. 9. The effect and dependency of FHLB funding<br />20 % of its deposits consists of FHLB<br />Consists of poor quality of assets<br />WaMu owed $82.9 billion to the FHLB<br />It held as assets of $118.9 billion in single-family loans<br />It had non-performing assets of $11.6 billion<br />9<br />
    10. 10. Characterize the deteriorating effect on earnings<br />Earnings decreased multi foldedly<br />Interest delinquencies & defaults.<br />Misrepresentations of assets.<br />10<br />
    11. 11. Identify the events of 2007/8 which contributed significantly<br />Financial crisis broke<br />out in September <br />2008(Sub Prime crisis)<br />Closing 160 of its 336 home-loan offices and removing 2,600 positions in its home-loan staff<br />Rejected JPMorgan Chase's offer that valued WaMu at $8 a share, mostly in stock.<br />Stated its intent to close its approximately 186 remaining stand-alone, announced a $7 billion infusion of new capital.<br /> Alan H. Fishman replaced Kerry Killinger as a CEO.<br />11<br />
    12. 12. Who was primarily responsible for the crisis?<br />Decline in public confidence in large financial institutions……!<br />Killinger's goal was to build WaMu into the “Wal-Mart of Banking,”<br />Complex mortgages terms were easy for the least creditworthy borrowers<br />The option ARM was "like the neutron bomb”<br />(lacked the proper knowledge to interpret their mortgages and were locked into contracts)<br />“It was a late entry into the subprime market as a way to juice the oncefast‐growing company’s sluggish earnings” The Wall Street Journal<br />12<br />
    13. 13.  liquidity failure at WaMu was induced by the decline in public confidence in large financial institutions<br />WaMu's large mortgage holdings in California and Florida, two states hit by the largest price declines after the housing bubble burst.<br />Federal law that requires savings and loans to invest two-thirds of its assets in real-estate.<br />"Had WaMu's liquidity crisis occurred two weeks later, there would have been no failure," Reich<br />13<br />
    14. 14. What was the dollar impact of the crisis?<br /> Failure of the United States largest bank<br />With dollar liquidity shrinking(Treasury announced it would issue $100 billion in new debt)<br />Increased interest payout<br />Resulted in a 700 billion dollar bail out.<br />Dollar depreciation <br />Precious Metals prices were smashed out<br />14<br />
    15. 15. How was the crisis resolved?<br />WaMu's share price had closed as low as $2.00 as compared to high as $45.00<br /> Federal Reserve and the Treasury Department to step up pressure on WaMu<br />Wa Mu assets (all branches, Deposit liabilities and secured debts) purchased by JPMorgan Chase. for $1.9 billion<br />Stockholders were nearly wiped out<br />WaMu sued the Federal Deposit Insurance Corporation (FDIC) for US$ 13 billion.<br />illegal seizure of WM assets and deposits and the complete destruction of shareholder equity<br />15<br />
    16. 16. What was the learning of the crisis?<br />The option ARM is a nuclear bomb.<br />Never Give Credit without Collateral.<br />Don’t keep low lending standards by giving sub prime loan.<br />Don’t be aggressive lenders in the mortgage industry<br />Company growth should not be based on an unstable liabilities<br />Avoid Bad quality acquisitions, don’t acquire Company with poor quality of its assets.<br />16<br />
    17. 17. What is the present state? <br />Washington Mutual Bank branches will be renamed to Chase or will be shuttered.<br />WaMu credit and debit cards will also carry the Chase logo.<br />Most branches doesn’t exist now, as been taken over by J P Morgan Chase.<br />It has been delisted from stock exchange<br />17<br />
    18. 18. 18<br />THANK YOU<br />

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