Why Wamu Can’t Fail

by James & Miel on September 17, 2008 · 0 comments

Here is a great clip from Yahoo Finance’s Alexis Glick about why WaMu can’t fail.

It basically says that it is not legal for the US government to allow Washington Mutual to fail. The stakes are just too high. Bankruptcy is no longer an option. Finding a buyer for WaMu is the only solution.

Here are the numbers:

WaMu has $180 Billion in deposits and the average size of an account is $5,200. There is a question about how much of that is FDIC insured.

WaMu also borrowed $58 Billion from the Federal Homeloan Bank of San Francisco.

The likely plan:
It seems most likely that there will be an orchestrated sale of WaMu, assisted by the US government.

The added difficulty:
The FDIC has only $45 Billion dollars on hand. Only 11 banks have failed recently, when 3,000 failed in the 80s. Back in the 80s the numbers weren’t neither as high as they are now.

I think the only thing that Yahoo overlooked was the quite obviously reality that WaMu has already failed!

Stay tuned for what comes next!

Miel

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