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Washington Mutual, bought by banking giant JP Morgan for $1.9bn after seizure by the US authorities late last week, has registered as the biggest collapse of a high-street bank on record.
The Office of Thrift Supervision said customers withdrew $16.7bn of deposits in 10 days beginning on September 15 – the day Lehman Brothers declared itself bankrupt, sparking a crisis of confidence in the banking system.
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According to the UK’s Guardian WaMu was heavily burdened by controversial "option ARMs" that allow borrowers huge flexibility in setting the level of their own repayments – products widely blamed for helping spark last year’s credit crisis.
Another significant player in the American mortgage market, Wachovia, reportedly entered into preliminary talks for a potential buy-out with a number of lenders over the weekend after its shares fell 27 per cent on Friday.
Wells Fargo, Banco Santander of Spain and Citigroup are all listed as possible suitors by Bloomberg and The Australian.
Published: 29-09-08
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