Looks like WaMu is gone

[Headless Thompson Gunner]

I really don't get this anti CEO fad that's running high right now.  Class warfare and populist revenge don't make any sense at all.

What's wrong with Fishman's pay? 

Fishman didn't cause WaMu to fail.  He's a good enough executive to command the kind of contract that pays out $20mil in the event of a buyout.  Why shouldn't he be paid what he's worth?  The only people paying him are the people who hired him, the people who stand to lose the most if he preforms poorly.

Hell, from the perspective of WaMu's business, getting bought out is a darned good thing.  It means that WaMu's bank branches stay open, their employees stay employed, and their depositors remain protected.  Given the only likely alternative was bankruptcy for WaMu, it sounds like Fishman did a darned good job. 

[Firethorn]

As I understand things, WaMu corporate bonds are now worthless.

From what I understand, Bonds have to be repaid before the stockholders can get anything in a liquidation.

You might not be as bad off as you think.

[slingshot]

Been reading up on WaMu.  Looks like another fatality to the subprime mortgage business. 

I was referring to money market funds issued by mutal fund companies, not directly by WaMu.  They are potentially invested in all kinds of different instututions with WaMu being one of them.

[MillCreek]

Since WaMu is headquartered in Seattle, suffice it to say that this is front page above the fold news in this area.  In addition to the thousands of headquarters and back office jobs that might be lost here, a substantial amount of money and executive time for local charities and several hundred thousand square feet of local Class A office space will all be going as well.  I had not thought about the charities and office space.

[Manedwolf]

There goes Wachovia.

Down 40% in the past few hours, value around $8 a share and falling. I expect an FDIC takeover this weekend.

[Scout26]

I think it'll be a damn shame if those responsible aren't made to pay. 

Unfortunately they're the ones in Congress holding hearings.....Barney Frank, Chuck Schumer etc.   

Hint:  How can you tell it's a democrat caused scandal......'cause there's no republican being raked over the coals.....

[BryanP]

That's a shock.  Not that WaMu went under, but usually they wait until after the market closes on Friday to do stuff like this if at all possible.

[grampster]

Kinda makes you wonder why the FDIC took over WaMu and maybe another bank just days before congress finally decides how they are going to react.  Why couldn't FDIC wait till that issue was over.  A few days one way or the other wouldn't make a difference...unless of course someone stands to gain from these takeovers.

[Manedwolf]

Kinda makes you wonder why the FDIC took over WaMu and maybe another bank just days before congress finally decides how they are going to react.  Why couldn't FDIC wait till that issue was over.  A few days one way or the other wouldn't make a difference...unless of course someone stands to gain from these takeovers.

If you were interested in a car only for the parts, would you rather buy it at full sticker price, or wait till someone drove it into a wall, then step in to make an offer for the salvage parts?

A lot of people at very high levels have a lot of friends in these institutions. Remember who Paulson's former employer is, for one.

[Brad Johnson]

I haven't read the details of the buyout, so everything I'm about to say may not apply.

Normally if someone "buys" a publicly traded company like WaMu, they are buying the stock by trading it for their own.  The WaMu shares will be traded for JP Morgan Chase shares, though not dollar for dollar.  The value of the trade will be divided among the outstanding shares of WaMu stock.  That amount per share will be calculated for each WaMu shareholder.  The shareholder will then receive a like dollar amount of JPMC shares in echange for their WaMu shares.

In other words...

1) JPMC says we will pay $1000 for WaMu, which has 1000 shares of outstanding stock. ($1 per share)

2) You have ten shares of WaMu stock. ($10 worth)

3) JPMC stock is worth $1.25 per share.

The $10 worth of WaMu will convert to $10 worth of JPMC at $1.25 per share.
$10 / $1.25 = 8.
You now have 8 shares of JPMC.

At least that's how it's supposed to work. 

Brad

[Unisaw]

Brad, JP Morgan isn't buying the corporate entity, just certain of its assets.

[TexasRifleman]

At least that's how it's supposed to work.

That is not what happened here.  WaMu didn't sell to JPMC.  The Fed shut WaMu down first.  Once the FDIC declares the bank insolvent, shares are worthless.

FDIC sold some assets with value to JPMC but WaMu as a corporate entity was gone before the sale.

This is why I have a problem with the massive payout of bonus money to the ex-CEO.  No shareholders get anything out of this.  The CEO should not have been paid the bonus since the bank was closed BEFORE the acquisition.    Shareholder equity in WaMu was nonexistent the moment the FDIC closed the doors.

I'm sure WaMu had MANY financial obligations.  That they took the small amount of remaining cash and paid the ex-CEO bonus FIRST is my problem. He should have had to wait in line with all WaMu's other creditors to get paid. But he was paid first, that's not right. It has nothing to do with "class warfare" or any of that.

[K Frame]

Rifleman is correct.

Morgan didn't purchase all of WaMu, they purchased the banking assets. The lion's share of what they got was depositor operations and branches. I'm not 100% sure about the mortgage liability, but JP Morgan has said it will write down WaMu's loan portfolio by over 30 billion.

WaMu as an entity still exists, but has declared Chapter 11 bankruptcy.

What really pushed the seizure and sale was the fact that depositors pulled almost 17 billion out of their accounts in a little over a week, and the outflow was getting faster a lot quicker.

[Waitone]

WaMu down

Next up?  Wachovia

[Brad Johnson]

Brad, JP Morgan isn't buying the corporate entity, just certain of its assets.

Like I said, "I haven't read the details of the buyout, so everything I'm about to say may not apply."

 

Brad

[K Frame]

Now you have information that may apply.

You're smarter than you were a half hour ago.

Aren't you lucky?

[Brad Johnson]

Aren't you lucky?

Nope, that makes me "fortunate".

"Lucky" would be a bus full of nekkid Hooters waitresses. 

Brad

[seeker_two]

Now you have information that may apply.

You're smarter than you were a half hour ago.

Aren't you lucky?

Wasn't the same thing said in the Garden of Eden once?....