FDIC Dodges WaMu’s Bullet
Washington Mutual, with $307 billion in assets, is by far the biggest bank failure in history, eclipsing the 1984 failure of Continental Illinois National Bank and Trust in Chicago, an event that presaged the savings and loan crisis. IndyMac, which was seized by regulators in July, was one-tenth the size of WaMu.
The one bright spot for US taxpayers is the buyout by JPMorgan, which saves them from insuring WaMu’s accounts through the FDIC. Ironically, the FDIC, what was supposed to be the US deposit insurer of last resort, will probably itself need a bailout in the near future. According to a research firm quoted by Bloomberg, the $45 billion fund will need about $200 billion to cover the 100 banks which are estimated to fail from now through 2009. A WaMu bailout alone would have cost $30 billion.
Of course, the activities of the FDIC will seem positively quaint if the $700bn Paulson bailout is passed.