JP Morgan'a turn
The current financial crisis seems to be a great opportunity for those who have cash and the ability to make a snap decision, that is, the ones that didn't get stuck holding too much bad paper/ As we pointed out before, Bank of America managed to acquire both Countrywide (private mortgage bank) and Merrill Lynch (broker and investment bank) at bargain prices.
But JP Morgan Chase, close rival to Bank of America, is following suit. It acquired key assets of failed investment bank Bear Stearns at fire sale rates (a mere $270 million). Just this week, it managed to buy the key assets of Washington Mutual, the country's #1 savings and loan. WaMu's bankruptcy turns out to have been the biggest bank failure in US history.
The deal was for a piffling $1.9 billion, paid to the Federal Deposit Insurance Company (FDIC), which had the bank in receivership. JP Morgan outbid other suitors, and was in a position to keep the bank doors open with an infusion of cash and operational expertise. That's a small fraction of what WaMu would have commanded even a few months ago. By the time JP Morgan had stepped in, the stock of WaMu had slumped by over 90%. Clearly the bank has serious problems, including a large portfolio of poor to uncollectible mortgages. But it also has real assets: $307 billion in assets and $188 billion in deposits. As with Bear Stearns, the real estate alone is probably worth the price JPMorgan paid.
The purchase means that WaMu customers will see no loss of service or risk of money losses. On the other hand, WaMu stockholders, debtors, and the private equity owners of its holding company were wiped out.
As with the Bank of America deals, I have to wonder whether such a diversified, huge financial company can be managed. Unless JP Morgan is planning to spin off or sell off assets, it's hard to imagine that JP Morgan Chase won't get into the same kinds of difficulties as Citigroup has, or as indeed WaMu got, with its hell-bent explosive growth for a local S & L to a giant national bank over the past decade.
And speaking of Citigroup, it now appears that it is bidding against Well Fargo Bank to take over Wachovia. Is that the next shoe to drop?
You have to wonder. The major banks all grew rapidly when economic times were good. Now they are expanding when times are tough. It seems every course leads to more and more concentration.
8:57:16 PM 
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