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JPMorgan Buys Failed WaMu Assets for $1.9 Billion

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posted on Sep, 25 2008 @ 09:45 PM
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reply to post by grimreaper797
 


your right we do know now how much JPMorgan has agreed to pay. but we don't know how many assets they purchased with that. we also don't know what price they will be able to sell those assets for or when there will be a market to sell them in. But lets say JPMorgan bought these assets at 1.9 billion(which they did) and they worked out a deal to resell them or rewrite the mortgages But they could only recover 800 million for those assets not a good deal for JPMorgan.

Plus with no way to get rid of these toxic assets right now or in the very near future they will have to sit on JPMorgans books causing illiquidy for JPMorgan thus acting like a weight dragging it to the bottom.




posted on Sep, 25 2008 @ 09:48 PM
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reply to post by mybigunit
 


No even though they own stock in the federal reserve bank of NYC JPMorgan the bank itself is a member bank of the federal reserve Bank of NYC.

I got what you meant before i just should have explained it better. its been a long night and posts are starting to run together


edit speeling


[edit on 9/25/2008 by Mercenary2007]



posted on Sep, 25 2008 @ 09:51 PM
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reply to post by jackinthebox
 


i didn't forget about you i promise.. Yes that looks about right.

But how long do you think it will be before they are forced into having one?



posted on Sep, 25 2008 @ 09:55 PM
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Originally posted by Mercenary2007
your right we do know now how much JPMorgan has agreed to pay. but we don't know how many assets they purchased with that. we also don't know what price they will be able to sell those assets for or when there will be a market to sell them in.


Why do you keep assuming they are going to sell the assets? They would be stupid to sell the assets. Its a huge unnecessary risk. I doubt somebody with a 200,000 dollar mortgage still couldn't pay a mortgage at 50,000 dollars, which is essentially what would happen in a firesale.

The mortgage was given for 200,000 and JPmorgan buys it for 50,000. There is a REALLY good chance that the people that took the mortgage out, even with the fact they were over extended, were not THAT over extended to the point that they couldn't afford to pay a 50,000 dollar mortgage.

If the profit margin for both companies is 25% that means that WaMu needed to make 250,000 dollars by the time the mortgage was up, where JPmorgan only needs to make 62,500 dollars. HUGE difference, same profit margin. Essentially, JPmorgan is buying the mortgage WaMu gave a couple years ago for a quater of the price.

The reason the assets are illiquid is because the home owners over extended themselves. Hit the problem at the source, buy the assets dirt cheap, which JPmorgan did, then refinance. You make the assets good again.



But lets say JPMorgan bought these assets at 1.9 billion(which they did) and they worked out a deal to resell them or rewrite the mortgages But they could only recover 800 million for those assets not a good deal for JPMorgan.


A majority of the mortgage, once refinanced, would cease to be mortgages they need to sell. Say 15% of the mortgages, even after this HUGE price reduction, still could not be paid for. These are the ones that they would sell later on the market.

The chances are good that even if 15% were sold at 25 cents on the dollar for what JPmorgan bought them for, JPmorgan would still make a huge deal in the larger scheme of things because they turned a profit on most of the newly acquired assets.

You honestly think JPmorgan, the third largest bank asset wise, would risk bankruptcy to acquire WaMu? Nope. They acquired them for dirt cheap because it was an easy profit maker. They don't take unnecessary risks on these things.

There is more than one way to go about dealing with new assets bought at fire sale.



Plus with no way to get rid of these toxic assets right now or in the very near future they will have to sit on JPMorgans books causing illiquidy for JPMorgan thus acting like a weight dragging it to the bottom.


Why would they want to get rid of them? They could just refinance them and start turning a profit on them.

[edit on 25-9-2008 by grimreaper797]



posted on Sep, 25 2008 @ 10:07 PM
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reply to post by grimreaper797
 


What I'm saying is more than what JPM is getting off of WaMu. Jamie Dimon is my second pick for "evil banker for the new millenium" so far, beat only by Hank Paulson.

They all have similar assetts tucked away in some part of their asset sheet. Were they to be forced to mark these assets to what someone was willing to pay for them alot more of these institutions would be bankrupt.I perfectly understand that something is only worth what someone will pay for it. What I am most afraid of is that JPM, GS, MS, C and BAC will buy these distressed assetts at a lowball price and then launder them with a profit at the taxpayers expense through whatever they are currently cooking up.

I say that anything CONgress can do will only delay the day of reckoning. Let these institutions fail now then the government can step in and unwind them and the taxpayer might actually realize a profit.



posted on Sep, 25 2008 @ 10:10 PM
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reply to post by jefwane
 


We are letting these institutions fail now. That is what THIS is. We just let WaMu fail. JPmorgan bought up the stuff that they wanted and are going to do that same thing with the next bank that fails in they can.

JPmorgan is doing EXACTLY what is in the stockholders interest, profitting off the failure of another company.



posted on Sep, 25 2008 @ 10:15 PM
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reply to post by grimreaper797
 


No we are not. Our elected CONgresscritters are at this very moment trying to figure out a way to protect a select few regardless of how responsible they are for the current mess. Did you by chance pay any attention to the "slosh" or the effective FFR over the past couple of days? Bernanke drained a HUGE amount of liquidity from the system this week. The timing of this drain to coincide with the failure of WAMU and the debate on the bailout leads me to believe something more is going on than I can put my finger on today.



posted on Sep, 25 2008 @ 10:20 PM
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reply to post by jefwane
 


Lol, I had to watch the entire congressional hearings thus far. Ive been watching the stock markets/the news/reading up on updates in congress for the past two weeks. Trust me, I know whats going on right now.

They want to bail out these banks, that doesn't mean they are currently doing it. Lehman Brothers went bankrupt. Meryll Lynch got bought out. WaMu just got overtaken by regulators then bought up partially by JPmorgan.

Barclay Company, instead of buying out Lehman Brothers, waited till they went bankrupt and bought the assets dirt cheap. Wallstreet praised him for his smart moves that benefitted his stockholders.

This is a vulture market. If one bank dies, the others will feed on it. Don't blame JPmorgan for doing what is best for their stockholders and profits, when another bank would have done the same thing if they got the chance.

Either our government bails them out, or big banks buy the assets of failing banks for dirt cheap. Your choice. Congress choice, I should say.



posted on Sep, 25 2008 @ 10:28 PM
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reply to post by grimreaper797
 


They have to sell them to turn a profit on them. Do you honestly think that anyone is going to be able to afford to refinance them. Everything that is being done right now is to keep prices were they were can we say price fixing.

The Market has said the prices are to high and they must come down to were they should be. JPMorgan will have to sit on most of these assets as the fall in value to a point we're someone can afford to buy them. the longer JPMoragn holds them the more money they lose. the more money they lose due to inliqiudity the less money they have to stay aflot themselves.

It doesn't matter if they are the 3rd largest bank you bet your Butt they would risk bankruptcy if the man at the top says to. After all he sits on the board of a federal reserve bank remember he's not going to be hurting if JPMorgan goes belly up this year or before his term expires next year.

Honestly i see what youur getting at i really do but your not getting what i'm saying. Take a step back and look at the big picture. There has to be a market to deal with these assets and there isn't one. there isn't even a market to refinance them. no one is handing out credit. Banks aren't even loaning money to other banks.

So given everything that has happened there is no way JPMorgan can hold these assets and ride out the storm without at least some serious damage. The have the assets from Bear Stearns also and how many more assets will they be force to buy up? The dominoes are starting to fall.

Bernanke met with the leaders of congress lastweek. in his testimony in the senate hearing the other day he didn't come out and say what he told them but the senators that attended the meeting alluded to it durring the hearing. we had 7 days to try and stop the dominoes before it was to late.

Guess what 7 days was up today.

[edit on 9/25/2008 by Mercenary2007]

[edit on 9/25/2008 by Mercenary2007]



posted on Sep, 25 2008 @ 10:31 PM
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reply to post by mybigunit
 



Trying to find where it says the FDIC seized the bank?

Also, I notice Chase is only buying the "good" parts of the bank .. lol .. what the hell is going to happen to the bad mortgages?



posted on Sep, 25 2008 @ 10:35 PM
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reply to post by Mercenary2007
 


This is the last time I am going to comment on this, since you are clearly not reading my rebuttal to this part of your responses.

They do NOT have to sell these bad assets. As you said, they are bad assets because people cannot afford to pay them off. If JPmorgan buys them at a quater of the prices, they also only have to make a quater of the profit to meet the same profit margin.

THEY are the buyers you are talking about. This isn't a game of hot potatoe where everyone keeps passing around bad assets. Once somebody buys a bad assets (usually at a fraction of its cost to the company who made the loan/mortgage/whatever)they will refinance it, or do whatever they need to, in order to make it a good asset. A majority of the time, they will make money off this previously bad asset.

The problem in the market isn't finding buyers, its finding buyers that will buy it at a reasonable price. All the buyers want to buy it, but at the expense of the company selling it. The company loses MAJOR money on these fire sales. That is the only way they can sell it though. It is a DEAL for JPmorgan because now they can refinance it cheap and make a profit.

This concept is not hard, just go back to my previous posts if you still don't understand why JPmorgan DOES NOT NEED TO FIND A BUYER ON THE MARKET.



posted on Sep, 25 2008 @ 10:36 PM
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reply to post by Rockpuck
 


Whoever insured them is not going to be very happy. That is what is going to happen. Hopefully AIG wasn't the Insurer LOL.



posted on Sep, 25 2008 @ 10:40 PM
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reply to post by Rockpuck
 


from the OP's source

Washington Mutual, the largest U.S. savings and loan, was closed by the federal Office of Thrift Supervision, and the Federal Deposit Insurance Corp was named receiver. Customers should expect business as usual on Friday, the FDIC said.


IF the FDIC steps in and closes a bank they seize the bank and its assets.
edit to add: FDIC seizes WAMU
reply to post by grimreaper797
 

i have been reading what your saying but what your not getting is JPMoragn will have to have a buyer for these assets to make this profit your claiming they will make.

Wake up call their is no buyer right now or in the near future. YOu have to have money to make money

If no one is around to buy these assets even at a discount price there is no profit. they will have to sell them for a loss. and how does that help them again?

[edit on 9/25/2008 by Mercenary2007]

[edit on 9/25/2008 by Mercenary2007]



posted on Sep, 25 2008 @ 10:40 PM
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reply to post by grimreaper797
 



JPMorgan Chase Acquires Banking Operations of Washington Mutual
FDIC Facilitates Transaction that Protects All Depositors and Comes at
No Cost to the Deposit Insurance Fund

FOR IMMEDIATE RELEASE
September 25, 2008
Media Contact:
Andrew Gray (202) 898-7192
ang...@fdic.gov

JPMorgan Chase acquired the banking operations of Washington Mutual
Bank in a transaction facilitated by the Federal Deposit Insurance
Corporation. All depositors are fully protected and there will be no
cost to the Deposit Insurance Fund.

"For all depositors and other customers of Washington Mutual Bank,
this is simply a combination of two banks," said FDIC Chairman Sheila
C. Bair. "For bank customers, it will be a seamless transition. There
will be no interruption in services and bank customers should expect
business as usual come Friday morning."

JPMorgan Chase acquired the assets, assumed the qualified financial
contracts and made a payment of $1.9 billion. Claims by equity,
subordinated and senior debt holders were not acquired.

"WaMu's balance sheet and the payment paid by JPMorgan Chase allowed a
transaction in which neither the uninsured depositors nor the
insurance fund absorbed any losses," Bair said.

Washington Mutual Bank also has a subsidiary, Washington Mutual FSB,
Park City, Utah. They have combined assets of $307 billion and total
deposits of $188 billion.

Thursday evening, Washington Mutual was closed by the Office of Thrift
Supervision and the FDIC named receiver. WaMu customers with questions
should call their normal banking representative, service center,
1-800-788-7000 or visit www.WaMU.com. The FDIC's consumer hotline is
1-877-ASK-FDIC (1-877-275-3342) or visit www.fdic.gov.

# # #

Congress created the Federal Deposit Insurance Corporation in 1933 to
restore public confidence in the nation's banking system. The FDIC
insures deposits at the nation's 8,451 banks and savings associations
and it promotes the safety and soundness of these institutions by
identifying, monitoring and addressing risks to which they are
exposed. The FDIC receives no federal tax dollars – insured financial
institutions fund its operations.

FDIC press releases and other information are available on the
Internet at www.fdic.gov, by subscription electronically (go to
www.fdic.gov/about/subscriptions/index.html) and may also be obtained
through the FDIC's Public Information Center (877-275-3342 or
703-562-2200). PR-85-2008



posted on Sep, 25 2008 @ 10:53 PM
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``We got this at a price that protects us, where if we were wrong, it still protects us,'' Dimon, 52, said in an interview. The FDIC accepted JPMorgan's bid this morning, he said, and he already sent an e-mail to all of WaMu's employees.

So even he's not sure that this is a good deal for JPMorgan this deal could back fire on them in the long run.


Dimon also said on the conference call that he's in favor of the government's proposed $700 billion plan to prop up the banking industry, but didn't rely on it to complete the deal.

I call BS on the last line of this. he agreed to the deal so he could dump them off on us if the Bailout is passed. and he knows it watch and see. plus he'll dump the assets from Bear Stearns.


JPMorgan is taking on $176 billion in mortgage-related assets and writing down the value of it and other portfolios by about $31 billion, the company said. The bank will make a one- time payment of $1.9 billion to the FDIC as part of the deal.


So JPMorgan just added 145 BIllion in assets that will more than likely become illiquid

SOURCE

[edit on 9/25/2008 by Mercenary2007]

[edit on 9/25/2008 by Mercenary2007]



posted on Sep, 25 2008 @ 11:52 PM
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What does this mean for people who owe money on WAMU credit cards. i still owe on my card so will i be getting billed by jp morgan now.



posted on Sep, 26 2008 @ 12:24 AM
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i was reading this on yahoo, does this mean they are going to close all the washington mutual branches down?



posted on Sep, 26 2008 @ 01:13 AM
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Wrong place

[edit on 26-9-2008 by titorite]



posted on Sep, 26 2008 @ 01:41 AM
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reply to post by Mercenary2007
 


You don't understand that they don't have to sell these assets period. I'm sorry you could not grasp the concept of how this works. I explained it the best I could. Good luck with your future readings on the economy.



posted on Sep, 26 2008 @ 01:44 AM
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reply to post by Flory
 


I am well aware of what parts of WaMu were bought from JPmorgan. I was attempting to explain how fire sale purchasing works IF JPmorgan had bought these so called "bad" assets.




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