CRASH 2008-09 -- first wave

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WaMu Give Away by Feds

Funny Money Buys Washington Mutual, or how to buy a bank without paying out of your pocket.

 

Decline of WaMu

          In December of 2007 WaMu reorganized it home-loan division, closing 160 of its 336 office, and reducing 2,600 employees (22% of staff thereat).    In April of 2008 WaMu announced an S$7 billion infusion of new capital by new outside investors led by TPG Capital.  In addition WaMu found institutional holders who agreed to buy an additional $5 worth of newly issued stock.  In O8 there were there were 3 different CEOs.  By mid-September 2008 WaMu shares were going for as low as $2.00, a year early the shares were going for $30.  In 2008 about of funds with WaMu were with drawn, including a run of $16.7 billion in the ten day prior to seizure by the FDIC on September 25, 2008. 

 

 

What a deal for $1.9 billion:

6th largest bank, 119 years old, national presence

 

Morgan bought deposits, branch network, and virtually all of WaMu assets for $1.836 billion, while letting the liabilities be picked up by the feds.  They didn’t acquire the stock, nor are they obligated to cover much of the bond debt—these will be wiped out.  Nor did JPMorgan Chase & Co. have to shell out any cash, for it will be paid by the floating of new stock, $8 billion worth.*  Thus JPMorgan Chase will gain in value with the acquisition of WaMu, pay for it with money raised from the sales of stock, and they will have an estimated $6 billion left over from the sales of stocks.  This is the kind of deals the Neocons give to their business buddies, while have the small guy eat it for the housing bubble they have created through deregulation.  

 

* Normally when new stocks (which requires SEC approval) or the release of a large block of corporate owned stock occurs, the price of the shares goes down.  First stock prices reflects in a loose way the value of the company, thus more stock entail a reduction in the stocks price for it to reflect this value.  But since they have obtained such a give away (WaMu) from our government, JPM went up on the 26th 11% (or about $15 billion dollars flowed into their stocks) which closed at $48.24.  This was on top of a 5% jump on the 25th—before the acquisition was announced.  

 

This is the second sweetheart deal worked out through our government, the first being Bear Sterns (5th largest securities company), which was acquired for under $10/share (less than 10% of what its stock had been trading at on March 13th).  Bear Sterns had a 52-week high of $133.20, Jan of 07 at $172, and Feb. of or 08 at $92.  On March 14th the feds gave emergency funding to Bear Sterns.   The Fed bank also agreed to provide $29 billion of financing to a separate entity that will buy the mortgage-related assets of Bear Sterns—there will be no recover of those funds by the Feds.   Employees will lose more than $5.2 billion of their holdings in the company mostly through the company trust which holds 27.3 million shares. 

 

 

 

In 2007 Morgan Chase 2007 revenues were $146.9 billion of which $15.4 was profits after taxes, employees world wide 180,667, market capitalization $145.9 billion assets as of June 20, 2008 $1.78 trillion.  Current (0/26/08) market capitalization is $165.8 billion.  

 

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Teddy Roosevelt's advice that, "We must drive the special interests out of politics. The citizens of the United States must effectively control the mighty commercial forces which they have themselves called into being. There can be no effective control of corporations while their political activity remains."

Don’t miss the collection of Pod Cast links

 

Nothing I have seen is better at explaining in a balanced way the development of the national-banking system (Federal Reserve, Bank of England and others).  Its quality research and pictures used to support its concise explanation set a standard for documentaries--at http://www.freedocumentaries.org/film.php?id=214.  The 2nd greatest item in the U.S. budget is payment on the debt.