Federal regulators seized the savings and loan company Washington Mutual after the markets closed last night and negotiated the sale of WaMu to J.P. Morgan Chase Company. Regulators didn’t want WaMu to fail, which it was apparently about to do, because it could have cost the FDIC $30 billion, and the FDIC has just $45 billion in its coffers. Here’s the troubled tally so far ...
WaMu: Failed, seized by regulators, forced into shotgun deal with J.P. Morgan Chase. Some parts of the S & L to be operated by the federal government. Lehman Brothers: Failed last week. American International Group Inc: Feds spent $85 billion to take over last week.
Goldman Sachs and Morgan Stanley: Sunday, the government approved “emergency measures” to “stabilize” these two investment banks. IndyMac Bank: Pasadena, California bank failed in July, second largest bank failure in U.S. history (largest was last night with the failure of WaMu). Taken over by FDIC and now operated as the IndyMac Federal Bank. Deposits covered by FDIC but failure has drained FDIC’s coffers. And don't forget Fannie Mae and Freddie Mac, now in federal hands. Together these two mortgage giants hold $1 trillion dollars in mortgage holdings. Actually no: you the taxpayers are holding onto that bag.
On a somewhat brighter side, and just about anything would be at this point, in Florida, we had our first cool night last night—down to 64°F—in six months. It meant we could click off the air conditioners and open our windows and as we listened to the birds chip and the lawn mowers hum we could just hear the sound of Congressman John Mica (R-Florida) hollering “I told you so” all the way from Washington D.C.
To explain: when Congress Approved the bill in 1999 that repealed key provisions of the Glass-Steagle Bill—in place since the great Depression—and thus enabled banks to invest in speculative securities, Congressman Mica was one of just 86 members of the House who voted against the bill. He said then that even if the Republican leadership put bamboo splinters under his fingernails, he wouldn’t vote for this “modernization plan,” as it was then labeled. Turns out he was right in his opposition to the repeal of Glass-Steagle. Turns out this repeal is one of the reasons for the mess we’re in today.
Give credit where credit is due. Rep. John Mica looks good on this one.