WaMu’s bank run

October 29, 2009

A fantastic piece from the Puget Sound Business Journal’s Kirsten Grind. It documents WaMu’s final months, noting that the bank suffered two large bank runs that management successfully hid from the press at the time. See chart below.

[On a related note: Have you ever wondered why WaMu's failure -- $307 billion of assets, $188 billion of deposits -- never cost the Deposit Insurance Fund a dime? One reason was that FDIC moved relatively quickly. More importantly, losses on assets were forced onto shareholders and creditors. Common and preferred equity was wiped out, as were subordinated debtholders. Reader Andrew points out in the comments that there was a large buffer of capital (debt and equity) to absorb losses ahead of depositors.  (More on that from Kevin LaCroix)]

(Click image to enlarge in new window)

wamu-run

Grind also includes this interesting tidbit:

Each day, Brinks Security trucks pulled up to replenish WaMu ATMs across the country. Before the crisis, the trucks delivered about $30 million in cash a day nationwide, Freilinger said. During the September bank run, they delivered as much as $250 million a day.

WaMu was certainly seeing larger deposit outflows than most, but plenty of folks in “healthy” banks were pulling money out to stuff in their mattress. I wonder how much cash was being delivered to ATMs and bank branches nationwide last September and October…

Comments

“More importantly, losses on assets were forced onto shareholders and creditors. Common and preferred equity was wiped out, as were subordinated debtholders.”

I would like to offer you a chance to provide an example of an FDIC assisted transaction, since 1992, where this statement is not true.

Ironically, the FDIC was able to avoid the hit because of the high volume of non depositor debt. The FDIC has braod abilities to divorce these items from the remainder of the bank. Since deposits only made up about 60% of the funding, even impaired asset values were more than sufficient to cover the deposits. Plus JP ate the majority of the asset writedowns, likely as part of the agreement for getting WaMu for a lowball price.

Posted by Andrew | Report as abusive
 

Not suggesting this was abnormal Andrew….just got lots of questions on it. Your point that this time ’round there was a significant debt/equity buffer in front of deposits is helpful context.

Posted by Rolfe Winkler | Report as abusive
 

“I wonder how much cash was being delivered to ATMs and bank branches nationwide last September and October…”

i too, and i bet the numbers for jpm, wfc, bac and citi would be much more terrible then the numbers of wamu.
rep. kanjorski stated, in the week after 9/15 there had been a 550 bio bank run, and 16,5 bio from wamu. the “bad bank” wamu had 3%, in a time she was the sixt bigest bank in the us.
who`s painting a bad picture, to hide fraud and criminal
behavior?

Posted by much.faster | Report as abusive
 

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