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From Duff McDonald’s new book, Last Man Standing, the story of how JPMorgan’s takeover of Washington Mutual made CEO Jamie Dimon a Wall Street survivor.
The purchase of the assets and deposits of Seattle-based Washington Mutual—WaMu—in September 2008 was about as perfect a “Jamie Dimon acquisition” as one could imagine. WaMu, which called itself “the bank of everyday people” and had the tagline “Whoo-Hoo!” had seen three straight quarters of losses totaling $6.1 billion and in mid-September fell victim to a good old-fashioned run on the bank. In swooping in to pick up its assets, Dimon showed all the traits investors had come to expect from him: patience (the swooping came after more than a year of stalking the firm), speed, ruthlessness, and a bon mot or two.
“What became clear to anybody in finance in 2008 was that JPMorgan Chase was now the dominant financial institution,” says Marc Lasry of Avenue Capital, a hedge fund.
Well before Bear Stearns came along, Dimon and his team had been eyeing WaMu and coveting its footprint in both California and Florida, two states where Chase’s presence was negligible. (On Dimon’s one-pager of potential acquisitions, WaMu sat in the upper left-hand quadrant—a desirable target that had a strong strategic fit, if it could be picked off at the right price.) The retail chief, Charlie Scharf, had put together a report (“Project West”) on a possible combination ahead of a management retreat in the spring of 2007. “We always looked at it and we always came up with the same conclusion,” Scharf told The New York Times. “At the right price, this is No. 1. At the wrong price, this could be terrible.”
WaMu ultimately spurned a $7 billion offer—roughly $8 per share—from JPMorgan Chase in early April in favor of a capital infusion from a consortium of private-equity firms, most notably Texas Pacific Group, which put in $2 billion. There’s also the issue of regulators’ own self-interest. The weakest portion of a patchwork quilt of regulation, the Office of Thrift Supervision had seen two of the biggest thrifts crater in the past year—Countrywide and IndyMac—and if WaMu went away as well, there might be no more need at all for the government branch. What regulator would regulate itself out of existence?
By September, WaMu was at the top of every regulator’s list of disasters waiting to happen. If the company had gone into receivership with no buyer, it would have swallowed up about half of the FDIC’s funds for insured deposits.
On September 8, ratings agencies downgraded WaMu’s debt rating and sent its stock plummeting. [CEO Kerry] Killinger—who had been at the company since 1983—was fired by his board. But it was too late to try such a cosmetic fix. Depositors began withdrawing their savings en masse. In 10 days, they withdrew $16.7 billion.
After the market closed on Thursday, the OTS and FDIC announced that WaMu was being seized in the largest bank failure in U.S. history, and its assets were being sold to JPMorgan Chase. (WaMu had $307 billion in assets. The runner-up, Continental Illinois, which failed in 1984, had just $40 billion.) At 9 p.m., Dimon, [Chief Financial Officer Michael] Cavanagh, and Scharf held a conference call and took analysts through a 21-page summary of the deal. Fifteen minutes later, Dimon sent an email to the entire staff of WaMu, welcoming them into the JPMorgan Chase fold. Around midnight, Scharf boarded a jet for a flight to Seattle and a 7 a.m. meeting with WaMu’s new CEO, Alan Fishman. (One of his messages: You’re out of a job.)
Last Man Standing: The Ascent of Jamie Dimon and J.P. Morgan Chase. By Duff McDonald. 352 pages. Simon & Schuster. $28.
The deal boosted JPMorgan Chase into first place in nationwide deposits, with $911 billion to Citigroup’s $804 billion and Bank of America’s $785 billion, and made it the second-largest bank in terms of assets, with $2.04 trillion to Citigroup’s $2.1 trillion. (At the end of the first quarter of 2009, JPMorgan Chase was still the second-largest bank, with $2.1 trillion in assets to Bank of America’s $2.3 trillion, with Citi slipping into third place.) The purchase also gave the company a foothold in both California (691 branches versus just three pre-deal) and Florida (274 and 13, respectively), and a total of more than 5,000 branches nationwide. What’s more, there were cross-selling opportunities, as WaMu had never been big in either wealth management or commercial banking, and JPMorgan Chase could integrate those offerings into its new branches. (History showed any optimism to be well placed. After acquiring the branches of Bank of New York, Chase retail bankers boosted in-branch credit-card sales 20-fold and investment sales by 40 percent.)
The cost was a mere $1.9 billion plus $31 billion in writedowns against estimated future losses in WaMu’s loan portfolio. (The April prediction of $30 billion in losses, in other words, had been dead-on.) JPMorgan Chase’s employee roster jumped from 195,000 to 238,000.
The New York Daily News encapsulated the reaction to the deal with the headline “JPMorgan CEO Jamie Dimon Eats Banks for Breakfast.” The New York Times went with “1-800-CALL-DIMON.”
“What became clear to anybody in finance in 2008 was that JPMorgan Chase was now the dominant financial institution,” says Marc Lasry of Avenue Capital, a hedge fund. “We’re trying to do more business with them, because when you have more power, they can get more things done. They’re in a position now where they can choose who they want to do business with.”
The cold-blooded competitor in Dimon then made an appearance. “Bear was never a home run, but WaMu will prove to be a great thing for the company over the long run. Will we be able to say that three years from now? At that point, you might very well be asking me, ‘How could you have done that in the midst of all those things that were going on?’ And I’m going to look at you and say, ‘Take your bets, friend. Take your bets.’ ”
Excerpted from Last Man Standing: The Ascent of Jamie Dimon and JPMorgan Chase, by Duff McDonald, published this month by Simon & Schuster.
Plus: Check out Book Beast, for more news on hot titles and authors and excerpts from the latest books.
Duff McDonald is a contributing editor at New York magazine and a former contributing editor at Condé Nast Portfolio.
For inquiries, please contact The Daily Beast at editorial@thedailybeast.com.
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Duff McDonald is a contributing editor at New York magazine and a former contributing editor at Condé Nast Portfolio. His book, Last Man Standing, about Jamie Dimon, chairman and CEO of JPMorgan Chase, was published by Simon & Schuster in October.
hockeydog
"Take your bets friend, take your bets." -a great quote, from a great man. Can't we somehow make Jamie Dimon Vice President or something?
Such a man of greatness should be elevated to the highest platform in the land, even the world. Oh, the splendor. And while we are at it, let's promote his bigger butted buddy Lloyd to King, and make their bosom pal, Henry Paulson Emperor.
Who needs Obama, now that we have the Big Three?
kennethbrave
J P Morgan Chase is that the banks run by rockefellers and Rothschild.? Did they hire bylthe Masters and invent to CDS? Is this proof that Ben Franklin's prediction 200 yrs ago that we are being enslaved by Shylock money bags?
W3Research
Washington Mutual was unlawfully seized and gifted by a colluding Shelia Bair of the FDIC to JP Morgan Chase and its corrupt CEO Jamie Dimon in order to keep them afloat ...
Please read the following Websites for the whole story ...
WAMUQ: Shareholder Information ...
http://www.wamu-shareholders-resources.com
http://www.wamurape.org
http://www.wamustory.com
http://www.wamuqd.com
P.S. ...
Just this past week even The Street had this to say ...
WAMUQ: JPMorgan's WaMu Deal: Collateral Damage.
http://www.thestreet.com/story/10603450/1/jpmorgans-wamu-deal-collateral -damage.html
W3Research
Washington Mutual was unlawfully seized and gifted by a colluding Shelia Bair of the FDIC to JP Morgan Chase and its corrupt CEO Jamie Dimon in order to keep them afloat ...
Please read the following Websites for the whole story ...
WAMUQ: Shareholder Information ...
http://www.wamu-shareholders-resources.com
http://www.wamurape.org
http://www.wamustory.com
http://www.wamuqd.com
P.S. ...
Just this past week even The Street had this to say ...
WAMUQ: JPMorgan's WaMu Deal: Collateral Damage.
http://www.thestreet.com/story/10603450/1/jpmorgans-wamu-deal-collateral -damage.html
sophia5
Uh . . .
Exactly who is the target audience of such a book ?
Those of us living on " Main Street " could care less
about the arrogant SOB's on " Wall Street "
and their seemingly incestuous financial connections . . .
. . . especially since we on Main Street bailed out their greedy incompetent asses.
HROLLER
Wamu TRUTH...Please Help...Wamu TRUTH...
READ THESE COURT DOCUMENTS!
JPMorgan admits that the FDIC took over a solvent bank in one of the latest court documents...
I'm enclosing a few more documents filed through the BK court in regards to a declaration of Thomas M. Blake (http://www.crai.com/ProfessionalStaff/listingdetails.aspx?id=1276 ).
The declaration can be found in 103-4.pdf at http://www.mediafire.com/?sharekey=3b830df9f3d0e6fce7c82ed4b8f0c380aff12395 630f22f3ce018c8114394287
Quoting:
12. Based on my review to date, there is no indication that the OTS performed a solvency analysis consistent with the test for insolvency specified in the Bankruptcy Code. There is no indication that the OTS assessed the fair sale-able value of the assets of WMB (or WMI). Nor is there an indication that OTS compared the fair sale-able value of the assets of WMB (or WMI) to the total amount of either company's respective liabilities. There is no indication that the OTS performed a comprehensive cash flow analysis of WMB (or WMI). Instead, the OTS found that "WMB met the well-capitalized standards through the date of receivership."8 Thus, without a thorough analysis of the assets, liabilities and capital of WMI and WMB, it is not possible to come to a reliable conclusion concerning the financial solvency of either entity, whether on a consolidated or stand-alone basis.
Here is another document that says as of August 14, 2008:
"We propose to decapitalize WMBfsb by returning $20 billion of capital to its parent. The $20 billion will include the master note of approximately $7 billion, proceeds from $3.5 billion of Discount Notes and cash generated through additional wholesale deposits and advances from FHLB Seattle. We propose the payment of at least $10 billion by September 30, 2008 and the remaining $10 billion through December 2009."
"The net balance sheet of WMBfsb will be approximately $34 billion to $36 billion after Project Fillmore. The leverage ratio will decrease to 25% from 62%. A well-capitalized institution requires an 8% or higher leverage ratio."
Read reference page 45 of DOCUMENT 103-1.pdf from here:
http://www.mediafire.com/?sharekey=3b830df9f3d0e6fce7c82ed4b8f0c380aff1 2395630f22f3ce018c8114394287
Enclosed is a link to the affidavit of Doreen Logan who is the Controller/ Assistant Treasurer of Wamu who states that there was no liquidity problems;
http://www.google.com/search?hl=en&ie=ISO-8859-1&q=%20Ex.%20D%20to%20Af fidavit%20of%20Doreen%20Logan%20%28%201%20/07-3/08%20Account%20Statements%2 9%20A-46%20...&btnG=Search
Remember, WMBfsb was also taken from the holding company and sold to JMorgan/Chase with all of the other assets for only $1.88bil.....
Please, take some time and read these documents. They are a bit long but well worth the read. Don't you wonder why the main stream media doesn't mention the suppose "failure" of the largest financial institution in America? Wamu was a 100 year old company.....Here is a link to all documents filed through the BK Court;
http://www.kccllc.net/wamu
Jamie Dimon planted "moles" in Wamu??? JPMorgan committed corporate fraud???
http://www.kccllc.net/documents/0812229/0812229090501000000000002.pdf
Wamu's claims against JPMorgan/Chase;
http://wmish.com/doc/gov/0603/JPM_V_WMI_-_ANSWER.PDF
I'm also enclosing another link that quotes Judge Hughes from a case against the FDIC that was wrapped up on August 24, 2005; http://blog.kir.com/archives/2005/08/judge_hughes_ha.asp
"The record shows that the swap was the only reason for this suit. It also shows that the FDIC knew that it had no factual or legal basis for its claims, and that its cases here and in Washington were shams."
As usual, Judge Hughes is acerbic in his opinion regarding the FDIC's conduct, noting in particular that FDIC officials "lied about it all under oath" and they "discarded the mantle of the American Republic for the cloak of a secret society of extortionists."
"It's hard to find a word that captures the essence of the FDIC's bringing this action. Irresponsible is close. Arbitrary, dishonest, exploitative, extortionate, and abusive all fit."
Judge Hughes concluded that Hurwitz and Maxxam "will recover their costs because the record reveals corrupt individuals within a corrupt agency with corrupt influences on it, bringing this litigation."
The Biggest Banking Heist in World History: Washington Mutual
http://www.marketoracle.co.uk/index.php?name=News&file=article&sid=1389 4
Please read this descriptive complaint that was submitted to the SEC from Apex Venture Advisors
Mike Stathis Managing Principal on October 7, 2008 in regards to the manipulation that occurred;
http://www.avaresearch.com/files/20090930175434.pdf
http://wamustory.com/
http://wamuqd.com/
http://www.wamu-shareholders-resources.com/wamued.html
http://wamuequity.org/history.html
http://www.wamucoup.com/
HROLLER
WaMu Makes JPMorgan $29 Billion as Shareholders Rail
http://www.housingwire.com/2009/05/26/wamu-makes-jpmorgan-29-billion-as -shareholders-rail/
HROLLER
WaMu Makes JPMorgan $29 Billion as Shareholders Rail
http://www.businessinsider.com/jpmorgans-29-billion-wamu-windfall-turns- up-the-heat-on-sheila-bair-2009-5
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