Largest Bank Failure in U.S. History

Sept. 26 (Bloomberg) — Washington Mutual Inc. was seized by government regulators and its branches and assets sold to JPMorgan Chase & Co. in the biggest U.S. bank failure in history.

WaMu became “unsound” after customers withdrew $16.7 billion since Sept. 16, the Office of Thrift Supervision said yesterday. Branches are open today and depositors have full access to their accounts, Sheila Bair, chairman of the Federal Deposit Insurance Corp., said.

The failure of WaMu, which has $188 billion in deposits, ratchets up pressure on lawmakers to piece together a rescue package for the nation’s financial system. The government’s inability yesterday to reach agreement on a bailout and the seizure of the biggest savings and loan sparked a sell-off of bank stocks, led by a 27 percent tumble in Wachovia Corp.

“We are going to see a lot more bank failures before the cycle is all over,” said Brian Horey, president of Aurelian Management LLC in New York, which had bet on a decline in Washington Mutual before a ban on such so-called short sales was imposed. “There are sufficiently large clusters of bad assets on a fair range of banks out there.”