Even local adherents of a religion that eschews worldly possessions moved savings out of beleaguered Washington Mutual Inc., now owned by JPMorgan Chase & Co. Inc.
The Chagdud Gonpa-Padma Ling Buddhist center in Spokane had been saving donations to buy the century-old house it occupies on the lower South Hill. But when resident lama Inge Sandvoss heard WaMu might be going under, the organization transferred money to Spokane-based Washington Trust Bank. It left a certificate of deposit and some operating funds.
“It seems like it will work out OK,” Sandvoss said. “Still, there’s cause for some concerns.”
In the nation’s largest bank failure, a run on Seattle-based WaMu’s funds by depositors caused the FDIC to confiscate the thrift Thursday.
So how will customers be affected following the purchase?
They should “continue doing business as usual,” said JPMorgan Chase spokesman Tom Kelly. Clients can continue using their account numbers, checks and ATM cards.
Now the nation’s second-largest bank, JPMorgan Chase does not have branches in Washington, so it is keeping WaMu’s outlets here, Kelly said. WaMu lists at least 20 locations in Eastern Washington and North Idaho, including inside the 15-floor Washington Mutual Financial Center in downtown Spokane, which the bank previously sold.
For now, WaMu clients cannot make credit card, car loan or mortgage payments at Chase branches, and vice versa. It could take months or years to integrate, Kelly said.
“The big difference is they’re backed by a stronger company,” he said. “If I’m a customer, I’m thinking this is really good news for me.”
For WaMu investors, the news is much worse. Stockholders, who had already seen shares plunge 95 percent since their October high of $36.47, have the lowest priority for claims against WaMu.
Investors will be notified by the FDIC as to their treatment as claimants of the receivership.
“Equity investors generally get the short end of the stick on these kinds of things,” said Stock Trader’s Almanac author and publisher Jeff Hirsch. “The company goes belly up, you lose.”
No one lost money deposited in the bank, according to the FDIC, which offers insurance protecting deposits up to $100,000, or $250,000 for some individual retirement accounts and 401(k)s. That insurance should not be needed if the JPMorgan takeover proceeds smoothly. The purchase prevents WaMu’s collapse from depleting the FDIC’s insurance fund, which stood at about $45 billion on Thursday.
FDIC regulations say deposits at WaMu that transferred to JPMorgan Chase will be separately insured from any accounts at JPMorgan Chase for at least six months after the sale. CDs from WaMu are separately insured until the earliest maturity date after the six-month period.
For homeowners with WaMu mortgages, JPMorgan likely will continue servicing those, rather than sell them to other banks.
“Chase today services $845 billion worth of mortgages,” Kelly said. “So it’s a big business, and just as WaMu did, Chase realizes it’s a scale business; it’s a processing business and you need to do a lot of volume to get good at it and make it worth it.”
Like WaMu, JPMorgan Chase operates ATMs inside national store chains, such as Walgreens. The combined company will have roughly 14,000 ATMs.
“I don’t see a big impact for our community,” said Jack Heath, president and chief operating officer of Washington Trust Bank.
“If you’re a common shareholder, it probably wasn’t as good a thing. For Spokane, Washington, and for the financial services industry as a whole, I think it’s unfortunate to see such an innovative company … disappear like that.”
But the failure could be a boon for local banks. Consumers “want to know they have a well-capitalized bank that’s run by people that they know that’s been around for a long time and will be,” Heath said. “The bottom line is this is a great opportunity for the community banks in our market.”
That is what attracted Sandvoss, of Padma Ling, to Washington Trust. The organization had been banking with WaMu nearly 20 years, she said.
“We’re just old-fashioned, we know; but even when you’re old-fashioned, you can move all your money,” she said.