The biggest bank failure has been recorded in the US banking financial history. Washington Mutual loan institution (WaMu), the largest loan and savings institution, was seized by federal regulators and sold to JPMorgan Chase for $1.9bn. The earlier largest failure recorded in US banking scenario was Continental Illinois, which had about $40bn assets at the time of its failure.

The takeover has resulted in global markets crashing down, with India also being no exception to it. The dollar-rupee equation is now Rs. 46.49 per rupee. The slow growth rate of the US economy has had a negative impact on the market.

JPMorgan, which also took over Bear Stearns, will now control all the deposits of WaMu as well its branches, thus becoming the largest bank in the US. The bank also plans to raise $8bn by issuing common stock to pay for the deal.

The collapse of Lehman Brothers led to the withdrawal of deposits by WaMu customers to the tune of $16.7bn from September onwards.

Source: TOI Sept.27th 2008