Reuters WaMu is largest U.S. bank failure

NEW YORK/WASHINGTON - Washington Mutual Inc was closed by the U.S. government in by far the largest failure of a U.S. bank, and its banking assets were sold to JPMorgan Chase & Co for $1.9 billion.

Thursday's seizure and sale is the latest historic step in U.S. government attempts to clean up a banking industry littered with toxic mortgage debt. Negotiations over a $700 billion bailout of the entire financial system stalled in Washington on Thursday.

Washington Mutual, the largest U.S. savings and loan, has been one of the lenders hardest hit by the nation's housing bust and credit crisis, and had already suffered from soaring mortgage losses.

Washington Mutual was shut by the federal Office of Thrift Supervision, and the Federal Deposit Insurance Corp was named receiver. This followed $16.7 billion of deposit outflows at the Seattle-based thrift since Sept 15, the OTS said.

"With insufficient liquidity to meet its obligations, WaMu was in an unsafe and unsound condition to transact business," the OTS said.



Customers should expect business as usual on Friday, and all depositors are fully protected, the FDIC said.

FDIC Chairman Sheila Bair said the bailout happened on Thursday night because of media leaks, and to calm customers. Usually, the FDIC takes control of failed institutions on Friday nights, giving it the weekend to go through the books and enable them to reopen smoothly the following Monday.

Washington Mutual has about $307 billion of assets and $188 billion of deposits, regulators said. The largest previous U.S. banking failure was Continental Illinois National Bank & Trust, which had $40 billion of assets when it collapsed in 1984.

JPMorgan said the transaction means it will now have 5,410 branches in 23 U.S. states from coast to coast, as well as the largest U.S. credit card business.

It vaults JPMorgan past Bank of America Corp to become the nation's second-largest bank, with $2.04 trillion of assets, just behind Citigroup Inc. Bank of America will go to No. 1 once it completes its planned purchase of Merrill Lynch & Co.



The bailout also fulfills JPMorgan Chief Executive Jamie Dimon's long-held goal of becoming a retail bank force in the western United States. It comes four months after JPMorgan acquired the failing investment bank Bear Stearns Cos at a fire-sale price through a government-financed transaction.

On a conference call, Dimon said the "risk here obviously is the asset values."

He added: "That's what created this opportunity."

JPMorgan expects to incur $1.5 billion of pre-tax costs, but realize an equal amount of annual savings, mostly by the end of 2010. It expects the transaction to add to earnings immediately, and increase earnings 70 cents per share by 2011.

It also plans to sell $8 billion of stock, and take a $31 billion write-down for the loans it bought, representing estimated future credit losses.

The FDIC said the acquisition does not cover claims of Washington Mutual equity, senior debt and subordinated debt holders. It also said the transaction will not affect its roughly $45.2 billion deposit insurance fund.

"Jamie Dimon is clearly feeling that he has an opportunity to grab market share, and get it at fire-sale prices," said Matt McCormick, a portfolio manager at Bahl & Gaynor Investment Counsel in Cincinnati. "He's becoming an acquisition machine."

BAILOUT UNCERTAINTY

The transaction came as Washington wrangles over the fate of a $700 billion bailout of the financial services industry, which has been battered by mortgage defaults and tight credit conditions, and evaporating investor confidence.

"It removes an uncertainty from the market," said Shane Oliver, head of investment strategy at AMP Capital in Sydney. "The problem is that markets are in a jittery stage. Washington Mutual provides another reminder how tenuous things are."

Washington Mutual's collapse is the latest of a series of takeovers and outright failures that have transformed the American financial landscape and wiped out hundreds of billions of dollars of shareholder wealth.

These include the disappearance of Bear, government takeovers of mortgage companies Fannie Mae and Freddie Mac and the insurer American International Group Inc, the bankruptcy of Lehman Brothers Holdings Inc, and Bank of America's purchase of Merrill.

JPMorgan, based in New York, ended June with $1.78 trillion of assets, $722.9 billion of deposits and 3,157 branches. Washington Mutual then had 2,239 branches and 43,198 employees. It is unclear how many people will lose their jobs.

Shares of Washington Mutual plunged $1.24 to 45 cents in after-hours trading after news of a JPMorgan transaction surfaced. JPMorgan shares rose $1.04 to $44.50 after hours, but before the stock offering was announced.

119-YEAR HISTORY

The transaction ends exactly 119 years of independence for Washington Mutual, whose predecessor was incorporated on September 25, 1889, "to offer its stockholders a safe and profitable vehicle for investing and lending," according to the thrift's website. This helped Seattle residents rebuild after a fire torched the city's downtown.

It also follows more than a week of sale talks in which Washington Mutual attracted interest from several suitors.

These included Banco Santander SA, Citigroup Inc, HSBC Holdings Plc, Toronto-Dominion Bank and Wells Fargo & Co, as well as private equity firms Blackstone Group LP and Carlyle Group, people familiar with the situation said.

Less than three weeks ago, Washington Mutual ousted Chief Executive Kerry Killinger, who drove the thrift's growth as well as its expansion in subprime and other risky mortgages. It replaced him with Alan Fishman, the former chief executive of Brooklyn, New York's Independence Community Bank Corp.

WaMu's board was surprised at the seizure, and had been working on alternatives, people familiar with the matter said.

More than half of Washington Mutual's roughly $227 billion book of real estate loans was in home equity loans, and in adjustable-rate mortgages and subprime mortgages that are now considered risky.

The transaction wipes out a $1.35 billion investment by David Bonderman's private equity firm TPG Inc, the lead investor in a $7 billion capital raising by the thrift in April.

A TPG spokesman said the firm is "dissatisfied with the loss," but that the investment "represented a very small portion of our assets."

DIMON POUNCES

The deal is the latest ambitious move by Dimon.

Once a golden child at Citigroup before his mentor Sanford "Sandy" Weill engineered his ouster in 1998, Dimon has carved for himself something of a role as a Wall Street savior.

Dimon joined JPMorgan in 2004 after selling his Bank One Corp to the bank for $56.9 billion, and became chief executive at the end of 2005.

Some historians see parallels between him and the legendary financier John Pierpont Morgan, who ran J.P. Morgan & Co and was credited with intervening to end a banking panic in 1907.

JPMorgan has suffered less than many rivals from the credit crisis, but has been hurt. It said on Thursday it has already taken $3 billion to $3.5 billion of write-downs this quarter on mortgages and leveraged loans.

Washington Mutual has a major presence in California and Florida, two of the states hardest hit by the housing crisis. It also has a big presence in the New York City area. The thrift lost $6.3 billion in the nine months ended June 30.



"It is surprising that it has hung on for as long as it has," said Nancy Bush, an analyst at NAB Research LLC.

Found at: http://news.yahoo.com/s/nm/20080926/ts_nm/us_washingtonmutual_jpmorgan_news

Astronomers spot a 'bizarre' strobe light star

A "most bizarre" strobe light star reported by European astronomers likely belongs to a long-sought family of compact "neutron" stars.

It initially showed up as a gamma-ray burst, leading astronomers to think it was the death of a star in the far-off universe. But after that first gamma-ray pulse, there was a three-day period of activity during which this odd celestial object emitted 40 visible-light flashes before disappearing again. Eleven days later, there was a brief near-infrared flaring episode recorded by ESO's Very Large Telescope. Then the weird object went visibly "silent" again.

"We are dealing with an object that has been hibernating for decades before entering a brief period of activity," said Alberto J. Castro-Tirado, lead author of a paper in this week's issue of Nature.

Astronomers now think this celestial enigma is a 'magnetar' located in our own Milky Way galaxy, about 15,000 light-years away in the area around the constellation of Vulpecula, the Fox. Magnetars are a type of young neutron stars. They boast a magnetic field that's a billion billion times stronger than Earth's.

To put that in perspective for those of us with the financial crisis willies: “A magnetar would wipe the information from all credit cards on Earth from a distance halfway to the Moon,” explains Antonio de Ugarte Postigo, the study's co-author.

Because magnetars can be celestially silent for decades at a time, they're hard to pin unless we're looking at the right place at the right time. Postigo says there's likely a large population of them in the Milky Way even though we've only identified about 12.

The magnetar, known as SWIFT J195509+261406, is a candidate for what scientists have been looking for: A magnetar moving towards a pleasant retirement as its magnetic fields decay.

Photo: The twisting of magnetic field lines in magnetars give rise to 'starquakes', which will eventually lead to an intense soft gamma-ray burst. In the case of the SWIFT source, the optical flares that reached the Earth were probably due to ions ripped out from the surface of the magnetar and gyrating around the field lines.
Found at: http://blogs.usatoday.com/sciencefair/2008/09/astronomers-spo.html

Atlanta gas crunch: 'We've got no gas here'

Mohammed Hussain got 3,000 gallons of gas delivered to his Chevron station in suburban Atlanta on Saturday. By Sunday morning, all of the gas, priced at $4.39 per gallon for regular unleaded, was gone.

"We're dry. We've got no gas here," Hussain, the station's manager, said Monday morning.

He said he has "no idea" when the next shipment will come, even though he's been in constant contact with the local terminal.

"It could be days," he said. "Obviously, we're disappointed. We're being patient. That's all we can do."

Across metro Atlanta, drivers in one of the nation's largest commuter cities are running into the same thing: a lack of gas and no clear idea when the situation will get better. State and industry officials say they're working as fast as they can and are urging people not to panic.

Christina Wedge, a resident of the Atlanta suburb Decatur, said her tank was on empty Sunday. When she went to fill up, she passed six stations closed down before finally finding one with gas for nearly $5 a gallon. She got just enough to continue looking for a cheaper price.

About a mile away, she found a station with long lines for gas around $4.29.

"I waited 30 minutes to get gas," she said. "It does concern me. I'm actually frustrated that the prices are so high."

Michael Lanfreschi, an iReporter from the suburb of Alpharetta, shared a similar story. He said he left work around noon to fill up his tank "when I started noticing all of the gas stations were empty."

"There was no gas to be found, then panic set in as I approached a gas station with a 40-car line," he said. "This is causing complete chaos. Why is this happening, and what actions are being taken to prevent this from happening again, and why did it happen in the first place?"

According to AAA, Atlanta's drivers are in for sticker shock when they do find a station with gasoline. The average price in metro Atlanta, as of Monday, for a gallon of regular unleaded was $4.02, nearly 30 cents higher than the national average of $3.74.

The gas supply has taken a major hit as refineries in the Houston area try to get back up to full capacity in the wake of Hurricanes Ike and Gustav, state and industry officials say. The Colonial Pipeline, which typically delivers 100 million gallons of gasoline, aviation fuel and other petroleum products throughout the southeastern United States, is not running at full capacity.

"Since the hurricanes both hit, we have been tapping the reserves of the stockpiles of the fuels that were made before the hurricanes hit, and we've been delivering those," said Steve Baker, a spokesman for the pipeline.

"That's caused us to operate at a reduced rate, less than we're capable of. So that's been part of the problem that we've faced, and we're trying to overcome."

Further complicating matters is that metro Atlanta has more stringent environmental requirements than other areas, meaning gas from other cities can't be brought in because it doesn't meet the city's smog requirements. The state is working with the state energy agency and the Environmental Protection Agency about getting a temporary waiver of that rule, said Bert Brantley, a spokesman for Gov. Sonny Perdue's office.

"I don't want anyone to think that's a panacea," he said.

But he added, "Anything that would help us get another truckload or two ... is going to help the situation."

Brantley said the state has already lifted some regulations allowing for drivers to work more hours to get fuel from the main terminal to stations and for heavier trucks to be allowed to carry larger loads than normal. The state is asking people who don't need to fill up their tanks to wait until later before doing so.

"There's somewhat of a shortage right now, but it certainly could get a lot worse if people were to panic and react in a way that would cause a run and drain what supply there is out there now," Brantley said. "That's why we're encouraging Georgians to conserve as much as possible."

The state would not offer a timeframe on when the situation might return to normal. Brantley, however, said the situation with Houston's refineries is getting better every day.

Jim Tudor, the president of the Georgia Association of Convenience Stores, which represents about 2,600 stores, praised the state for lifting some of the restrictions to allow for quicker delivery of fuel.

"We are working as fast as possible to try to get as many stations refilled," he said. "Having said that, we're still in catch-up mode."

That brings little relief to consumers.

iReporter Dustin Gatlin said he waited 45 minutes Sunday at an Atlanta QuikTrip before it shut down. He then waited for well over an hour at a different station.

"Yesterday, we were in line for about two hours and they actually had people [who worked for the gas station] out there directing traffic because there were people jumping in line, and they actually had to get people out there to watch," he said.

Source: http://www.cnn.com/2008/LIVING/wayoflife/09/22/atlanta.gas.crunch/?iref=mpstoryview

Happy 113th birthday for world's oldest man

TOKYO - The world's oldest man celebrated his 113th birthday on Thursday, telling reporters at his home in southern Japan about his joyful life and healthy appetite.

"I'm happy," said Tomoji Tanabe as the local mayor presented him with flowers and a giant tea cup glazed with his name and date of birth. "I'm well. I eat a lot," he added.

Tanabe, recognized by the Guinness Book of World Records as the oldest living male last year, eats mostly vegetables and believes the key to longevity is not drinking alcohol.



The former civil servant lives with his son, drinks milk every day and has no major illnesses, although he now writes in his diary only once or twice a month. He used to write on a daily basis.

"His favorite food is fried shrimp, but we've heard that he's cut back on oily food," said an official at his hometown of Miyakonojo, about 900 km (560 miles) southwest of Tokyo.

"He's said he wants to live for another 10 years, that he doesn't want to die." The Japanese are among the world's longest-lived people, with the number of those aged 100 or older at a record 36,276, a government report last week showed.

Japanese women have topped the world's longevity ranks for 23 years, while men rank third after Iceland and Hong Kong.

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