Sep 15, 2008 - Run on Washington Mutual

Washington Mutual Bank was a high-volume initiator of high-risk mortgage loans that were then packaged into mortgage-backed securities.

The bank had large incentives for loan officers to churn out as many mortgages as possible, most of which required little or no documentation.

Surprisingly, even though the bank was active in the non-traditional mortgage market, it was not subject to many OTS regulatory enforcements prior to 2008.

The collapse of Lehman Brothers unnerved WaMu depositors. They staged a credit-driven run on the bank, withdrawing $16.7 billion, or about 9% of the bank’s total deposits.

Fearing further loss of confidence and other bank runs, the OTS seized WaMu and placed it in FDIC receivership.

On September 26, JPMorgan Chase acquired Washington Mutual in a $1.88 billion transaction arranged by the FDIC.

Analyst estimates of WaMu losses prior to the JPMorgan transaction run as high as $20 billion. 

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