WaMu Failure: What it Means for Seattle

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Posted by The Tim on September 26th, 2008 at 8:27 AM · 134 Comments

From today’s Seattle Times: Feds seize WaMu in nation’s largest bank failure

WaMu’s 43,200 employees won’t feel any immediate impact, though it’s likely JPMorgan will drastically shrink the thrift’s headquarters staff. More than 3,500 people work at WaMu’s 42-story headquarters at Second Avenue and Union Street, along with 800 people elsewhere in Seattle and 1,500 people elsewhere in Washington state.

WaMu is also downtown’s largest office tenant, with about 1.6 million square feet in the central business district. It put some space on the market in recent months, helping raise downtown’s vacancy rate.

JPMorgan reportedly sent e-mails to all WaMu employees asking them to report for work as usual today.

Not surprisingly, I’ve got a few friends that work at WaMu corporate downtown. I really feel pity for them. The fact that WaMu put itself into such a dangerous position was not the fault of the rank-and-file corporate employees, but they’ll be the ones to feel the brunt of this failure.

I’d like to be clear that I do not take any pleasure in knowing that 4,300 people in Seattle are likely to lose their jobs, or the effect that will have on Seattle’s economy.

Another interesting bit from the article:

JPMorgan, which earlier this year offered to buy WaMu for $7 billion in stock — a deal former CEO Kerry Killinger turned down in the belief he could salvage the company — was the high bidder in an auction the FDIC conducted Wednesday, Bair said. Three other banks submitted bids for WaMu’s banking assets.

So four banks were bidding on WaMu’s assets, and $1.9 billion was the highest bid. Dang.

(Drew DeSilver, Seattle Times, 09.26.2008)

Categories: News
Tags: banks, FDIC, Local Economy, Seattle_is_special, WaMu

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134 responses so far ↓

1 rent for now // Sep 26, 2008 at 8:55 am

I wonder what ‘they’ will say now for the reasons to buy RE in Seattle.
2 David McManus // Sep 26, 2008 at 9:17 am

Does this mean it’s now a great time to buy?
3 deejayoh // Sep 26, 2008 at 9:26 am

It sounds like - in no particular order
1) blow to civic pride
2) ~4000 high paying jobs lost (and from what I heard from friends who had gone there, WAMU overpaid for talent)
3) Huge amount of downtown office space coming back onto the market

I think the most evident effect will be the 3rd. The commercial rents are rising in seattle crowd is in for a surprise. Maybe Microsoft will take the space. Or Warren Buffet. (that was sarcasm)
4 Jonny // Sep 26, 2008 at 9:29 am

welcome to the first phase of the Not So Great Depression

bailout or not, we’re headed down quite an ugly path. 3-5 years at a minimum. with mismanagement of the kind that got us into this mess, this could take 10 or more years.
5 Jillayne Schlicke // Sep 26, 2008 at 9:57 am

From the Federal Home Loan Bank’s website:

“Seattle – On September 25, 2008, in a transaction facilitated by the Office of Thrift Supervision and the Federal Deposit Insurance Corporation, JPMorgan Chase acquired substantially all of the assets, all of the deposits, and certain liabilities of Washington Mutual Bank of Henderson, Nevada. The transaction included the transfer of Federal Home Loan Bank of Seattle member Washington Mutual Bank, FSB of Park City, Utah, a wholly-owned subsidiary of Washington Mutual Bank.

As a result of the transaction, approximately $16 billion of Federal Home Loan Bank of Seattle advances outstanding to Washington Mutual, FSB are now outstanding to JPMorgan Chase. The Federal Home Loan Bank of Seattle remains fully collateralized on these advances.”

http://www.fhlbsea.com/OurCompany/News/NewsReleases/2008/20080926.aspx
6 frede // Sep 26, 2008 at 10:01 am

Bill Gates could have bought WaMu and put it on his keychain.
7 pfft // Sep 26, 2008 at 10:05 am

$1.9 billion plus the write downs that need to be taken. sort of like buying a home on the cheap because you need to pour money into it to fix it up.
8 Scotsman // Sep 26, 2008 at 10:18 am

$7 billion down the drain for Texas Pacific Group - one of the most respected PE firms in the world. That’s a big chunk of cash that just went up in flames. So much for their big save last spring. This is where deflation starts.
9 Dave // Sep 26, 2008 at 10:19 am

Why do we need a $700B bailout when they can just handle it this way. Paulson should just give some of that money to the FDIC and the FHLB and let them work their magic, just like they did on Lehman and WaMu. And all the other banks that will need the same treatment. Give the pain to the owners and not the taxpayers.
10 softwarengineer // Sep 26, 2008 at 10:19 am

ANOTHER ONE BITES THE DUST

I’m with Tim, this is horrifying.

It gives me some solice to remember, the scientific type Seattle Bubble bloggers tried to warn Seattle years ago, but the media’s pink pony hypnotism blinded most of the mob.

Our Dem/Rep politicians were paid to know and they just [purposely?] dropped the ball in denial years ago [or were paid off in campaign contributions to zip their mouths?].
11 deejayoh // Sep 26, 2008 at 10:25 am

JPM will take a $31B writedown from what I have read - so they are in essence paying $33B for Wamu - plus taking on any future downsided.

From what I have read previously, the estimates of potential writedowns there are more in the $20B range - so if that is correct JPM shareholders will be seeing some upside in a couple years.
12 Notabull // Sep 26, 2008 at 10:37 am

“Why do we need a $700B bailout when they can just handle it this way. Paulson should just give some of that money to the FDIC and the FHLB and let them work their magic, just like they did on Lehman and WaMu. And all the other banks that will need the same treatment. Give the pain to the owners and not the taxpayers.”

I agree, although I don’t know the full implications of that plan. We would essentially be giving one hell of a big chunk of change to FDIC and saying to the banks “ok, the window is open, if you’re going to fail, do it NOW and let’s get this done with!”.

We’d probably have to offer incentives to make them all want to come forward otherwise they might hang back like they’re doing now. Perhaps the FDIC could massively increase the insurance costs to the banks that they believed were going to fail, in order to partially fund their eventual failure.

The ONE good thing about this situation is that the public is getting a dose of what happens when regulation is not tight enough. Regulation, per se, is not a bad thing and the Kudlows and CNBC talking heads of the world need a slap in the face to make them realize this.
13 deejayoh // Sep 26, 2008 at 10:44 am

Hey Tim - can you shake that inventory reader for King Co SFH? Seems to be stuck.
14 The Tim // Sep 26, 2008 at 10:52 am

Heh, I’ve been noticing that too. I keep checking the feed sources to make sure they’re still updating properly. Seems pretty weird that it’s been holding steady for so long, but that’s what the MLS is saying.
15 Markor // Sep 26, 2008 at 10:53 am

I’m thinking of getting a 5% CD at JPMorganChaseWamu unless someone can talk me out of it.
16 jon // Sep 26, 2008 at 10:54 am

“Why do we need a $700B bailout when they can just handle it this way. Paulson should just give some of that money to the FDIC and the FHLB and let them work their magic, just like they did on Lehman and WaMu.”

That seems to be a large part of the Republican House plan. Unfortunately, they also threw in a capital gains tax holiday, which is the Republican equivalent of the free housing thrown in to the Democrat’s plan.
17 rose-colored-coolaid // Sep 26, 2008 at 10:56 am

What’s interesting is that this is largest bank failure ever, and it’s hardly even news. McCain deciding he will in fact debate tonight has captured more headlines…actually Lindsey Lohan dating a girl has probably captured more headlines than WAMU’s failure.

Our nation is really confused right now.
18 Sniglet // Sep 26, 2008 at 10:57 am

Has JP Morgan assumed all of WaMu’s debt? Are WaMu bond-holders safe?
19 Markor // Sep 26, 2008 at 10:58 am

I hope Obama slams McCain tonight for his grandstanding on the bailout.
20 alex // Sep 26, 2008 at 11:00 am

So Wamu rejected a 7B offer in JPMorgan Stock earlier this year… how much would that 7B be worth today, had someone kept the stock?
21 deejayoh // Sep 26, 2008 at 11:07 am

Are WaMu bond-holders safe?

What I read is that senior bondholders are going to be kept partially whole- $7b outstanding - they will get $0.27 on the dollar. ($1.9/7.0)

Subordinated debt and equity is all wiped out.
22 Dave // Sep 26, 2008 at 11:07 am

Notabull…

The FDIC can recover funds from future premiums they charge banks, so they don’t need to quickly (or steeply) raise rates. They have already talked of borrowings funds from the Treasury, which is the same source of funds that Paulson is using for his giveaway to the banking industry. And the banks SHOULD pay more for FDIC insurance, because depositors are scared to place their money in any account that is not insured.
23 Dave // Sep 26, 2008 at 11:08 am

Did Lindsay Lohan REALLY date a girl???
24 tyler // Sep 26, 2008 at 11:10 am

I post this link hesitantly, as the video becomes very political in the last few minutes, but the first few minutes give a nice recap of the runup to this mess. I am curious what people here think.

http://www.youtube.com/watch?v=H5tZc8oH–o

I have been reading the discussion here about whether this is cyclical/normal, etc., and have been enjoying that debate quite a bit.
25 Ray Pepper // Sep 26, 2008 at 11:25 am

Not sure about you but I find the whole Lindsay Lohan relationship a great distraction. I really wish though Lindsay picked Antonella Barber or Jessica Simpson. Then I would follow it as close as my 11pm Family Guy episodes.
26 Jillayne Schlicke // Sep 26, 2008 at 11:27 am

There’s a really good interview going on right now on the Dave Ross show 710 AM 97.3 FM
27 Sniglet // Sep 26, 2008 at 11:33 am

It looks as if WaMu bond holders are getting creamed. This is all starting to make sense now… The reason the whole deal was able to be pulled off is because JPM was able to shed liabilities to bond-holders. Otherwise there wouldn’t have been a need for FDIC intervention.

“It seems that WaMu’s major debt holders have been stranded by regulatory intervention,” David Hendler, an analyst at bond research firm CreditSights in New York wrote in a report today. “The deal structure seems to be unprecedented in that it excludes bondholders at the holdco and bank levels from the major assets and liabilities of the operating bank.”

http://www.bloomberg.com/apps/news?pid=20601087&sid=aCpGk.NPYZ3g&refer=home
28 victorchai // Sep 26, 2008 at 11:36 am

http://www.kbhome.com/HomeSearch.aspx

A sunny,$200,000 brand new house in CA vs. a cloudy $500,000 condo in Seattle.
Your choice!!!!!
29 CCG // Sep 26, 2008 at 11:37 am

“I hope Obama slams McCain tonight for his grandstanding on the bailout.”

I keep sending Obama faxes railing that since McPain supports the bailout, Obama can bury him right now simply by opposing it. I’m seeing people standing on freeway overpasses waving signs that read “NO BUSH BAILOUT” for Christ’s sake. Maybe he’s confident that he’s going to win anyway and doesn’t want to offend his masters (and they’re every politician’s masters, don’t kid yourself). I told him I’d vote third-party before I’d vote for anyone who supported this.
30 Interloper // Sep 26, 2008 at 11:39 am

A tangent: I wonder how the Seattle location of WAMU’s headquarters affected their risky business — and today’s uiltimate bank failure. Did all the Pink Pony talk, our rosy local real estate news media, and the ignorance of our citizens about the national real estate bubble make WAMU take more risk than if the company had based in, say, Phoenix?
31 deejayoh // Sep 26, 2008 at 11:41 am

It was in the Seattle Times this morning, if correct, pretty clearly laid out.

WaMu investors, for the most part, are out in the cold.

The $1.9 billion that JPMorgan paid for WaMu’s operations will go into a fund overseen by the FDIC for WaMu’s creditors. The only investors likely to get anything will be holders of WaMu’s senior unsecured debt. With $7 billion of that outstanding, those investors are looking at a payout of around 27 cents on the dollar.

Stockholders will get nothing, as will holders of more than $11 billion in WaMu subordinated debt and preferred stock. That includes private-equity fund TPG, which along with big institutional shareholders pumped $7.2 billion into WaMu five months ago.
32 patient // Sep 26, 2008 at 11:44 am

“Our nation is really confused right now” and if you believe our leaders it’s also incredibly spoilt. Many leaders paint a scenario where americans can’t get a mortgage or a car loan as a living hell worth blowing $700b of tax money to avoid. WTF I don’t have a car loan or a mortgage and it’s far from hell. If people don’t have the cash for a new Hummer buy a cheaper used car cash. You can get one for about two months worth of payments on a loan or lease. If you can’t get a mortgage, rent. If you can;t afford to rent you can’t afford a mortgage. Noone shouldbe surprised that peoples confidence in our leaders and the need for a bailout plan are totally shot and getting worse.
33 CCG // Sep 26, 2008 at 11:48 am

“A tangent: I wonder how the Seattle location of WAMU’s headquarters affected their risky business — and today’s uiltimate bank failure. Did all the Pink Pony talk, our rosy local real estate news media, and the ignorance of our citizens about the national real estate bubble make WAMU take more risk than if the company had based in, say, Phoenix?”

Undoubtedly, although they’d probably have failed even sooner if they’d been in Phoenix. If they’d been based in, say, Michigan, they might have been okay.
34 jon // Sep 26, 2008 at 11:49 am

“I keep sending Obama faxes railing that since McPain supports the bailout, Obama can bury him right now simply by opposing it.”

Save your faxes. The Democrat Senate leadership handed their side of the negotiations at the White House last night to Obama to lead. The meeting ended up with lots of partisan bickering and no deal.
35 anna // Sep 26, 2008 at 11:51 am

Essentially FDIC walk away with no dent on its balanace sheet. So it doesn’t need to ask Congress for more money. This is not as bad as i thought.

Instead of 700B bailout, we should just watch and see what happens. Or give 700B directly to SBA, for businesses that didn’t make the mistake of mortgages and so on, or give directly to taxpayers for a stimulus.
36 Cascadian // Sep 26, 2008 at 11:56 am

“Why do we need a $700B bailout when they can just handle it this way. Paulson should just give some of that money to the FDIC and the FHLB and let them work their magic.”

This is essentially James K. Galbraith’s plan, though he adds in a $200 billion fund for the purposes of Warren Buffett–style recapitalization efforts by the treasury. He also concludes that no matter what we do our economy is going to be in trouble for years.
37 Ray Pepper // Sep 26, 2008 at 12:01 pm

After Palin’s interview with Couric yesterday and her last 2 interviews prior Obama is a lock for the White House. The lack of judgement in her selection sealed McCain’s fate. The more she talks the worse it will get for McCain. We should start seeing less and less of her in October.

Bank it!
38 Lake Hills Renter // Sep 26, 2008 at 12:09 pm

It seems to me that most people up for election this year (both presidential candidates, 1/3 of the senate, all of the House) are too afraid of outright opposing any large bailout because of getting the blame if the house of cards crashes before the election. It’s better to shuffle your feet and continuously rearrange the furniture than to actually publicly state that you oppose a bailout on principle. That’s why I have gained a lot of respect for those that are willing to stand up against it.
39 Timber // Sep 26, 2008 at 12:17 pm

“It seems to me that most people up for election this year (both presidential candidates, 1/3 of the senate, all of the House) are too afraid of outright opposing any large bailout because of getting the blame if the house of cards crashes before the election. It’s better to shuffle your feet and continuously rearrange the furniture than to actually publicly state that you oppose a bailout on principle. That’s why I have gained a lot of respect for those that are willing to stand up against it.”

I look at it the other way the majority of the American people are against this plan. So it would make more sense to vote against sending the taxpayers money down the crapper right before the elections.
40 Dave0 // Sep 26, 2008 at 12:24 pm

Markor,
Don’t buy a CD for 5% from WaMu. Check out the “Velocity Checking” offer that Verity Credit Union has. That’s where I stash my savings. You get 5.05% apy on up to $40,000 in the checking account, as long as you use the debit card 12 times a month, sign up for electronic statements, and log into their website once a month. Oh, and they’ll also refund any ATM fees another bank might charge you, so you can use any ATM. If there is a transaction under $5 that I would normally put on my rewards credit card, I just put it on my Verity debit card. I usually spend around $50 a month on the debit card, and just transfer some cash back into the account each month to refill it back to the level I want. Commercial banks like WaMu can’t compete with credit unions. I don’t plan on ever using a commercial bank again and think this financial crisis may end up being the end of commercial banks altogether.
41 patient // Sep 26, 2008 at 12:24 pm

“I look at it the other way the majority of the American people are against this plan. So it would make more sense to vote against sending the taxpayers money down the crapper right before the elections.”

You would think but if you listen they all hedge with the comment: “We provide a plan and then it up to Paulson to determine if it will fix the problem”. Pathetic. I agree with LHR, I have huge respect for the ones that have the guts to oppose the bailout.
42 unearthly // Sep 26, 2008 at 12:30 pm

For Senior bond holders $0.27 cents on the dollar is a pretty good wipe out. I expect some heavy losses on the credit swap side as bond holder look to collect on defaults. Wonder if anyone will pay out and risk Bankruptcy - let the cascade begin…
43 Dave0 // Sep 26, 2008 at 12:30 pm

Sniglet,
Some debt holders will get something, others will get nothing, as The Seattle Times states:

The $1.9 billion that JPMorgan paid for WaMu’s operations will go into a fund overseen by the FDIC for WaMu’s creditors. The only investors likely to get anything will be holders of WaMu’s senior unsecured debt. With $7 billion of that outstanding, those investors are looking at a payout of around 27 cents on the dollar.

Stockholders will get nothing, as will holders of more than $11 billion in WaMu subordinated debt and preferred stock. That includes private-equity fund TPG, which along with big institutional shareholders pumped $7.2 billion into WaMu five months ago.

In my mind, the next logical question is, who are the largest holders of WaMu debt? Those are likely the next dominoes to fall.
44 Dave0 // Sep 26, 2008 at 12:45 pm

“WaMu has $28.4 billion in outstanding bonds, with Capital Research and Management the largest debt-holder, Bloomberg data show.”

Source: http://www.bloomberg.com/apps/news?pid=20601103&sid=aVA8ErWOAjmI&refer=us

I’m glad I don’t have my money being managed by The Capital Group, they’re probably not going to have a good year. 2% of their holdings just disappeared overnight.
45 SeattleMoose // Sep 26, 2008 at 12:50 pm

WAMU…..just another example of how the innocent majority are gonna have to pay for the sins of the guilty-as-H#ll few. Who I might add became filthy rich off their shenanigans.

WHEN ARE THE CRIMINAL ARCHITECTS OF DESTRUCTION GOING TO BE HELD ACCOUNTABLE!!!!???
46 Markor // Sep 26, 2008 at 12:57 pm

Dave0: Don’t buy a CD for 5% from WaMu. Check out the “Velocity Checking” offer that Verity Credit Union has. …

Thanks for the advice. I might do both. I like credit unions and would use them exclusively for CDs if I could get 5+% from enough of the local ones.
47 Markor // Sep 26, 2008 at 1:05 pm

Ray Pepper: After Palin’s interview with Couric yesterday and her last 2 interviews prior Obama is a lock for the White House. The lack of judgement in her selection sealed McCain’s fate. The more she talks the worse it will get for McCain.

I doubt it all. It’s hard for Seattleites to understand, but worse is better for Republicans. Their platform is mainly a fight against the intelligentsia.
48 cora // Sep 26, 2008 at 1:06 pm

Verity is for US citizens only, though. For some reason they and SMCU have issues with opening accounts for non-citizens. Mind, I’ve lived in Washington for most of my life, and it’s a little annoying that they don’t disclose that asterisk until you’re opening an account. And no, it’s not their charter, it’s their own conscious decision.

WaMu was actually pretty cool about that. My first US bank account was at WaMu. I closed it a few months back, alas. Washington Federal is stable and has ben pretty good to me but their rates stink. I wish Verity would get over it…SMCU is no loss, but Verity has a lot of neat products that I’d like to partake of.
49 sunsplint // Sep 26, 2008 at 1:24 pm

I’ve heard a few economic discussions out there that support a non-bail-out plan. Essentially, the theory is that the market is working and that the bailout would be a very narrowly focused intervention that would alleviate a certain portion of the condemned(investment banks) in an unfair manner.

I wish we could see all of the alternatives being discussed by congress.
50 Markor // Sep 26, 2008 at 1:27 pm

SeattleMoose: WHEN ARE THE CRIMINAL ARCHITECTS OF DESTRUCTION GOING TO BE HELD ACCOUNTABLE!!!!???

The craftiest ones probably broke no laws. The laws need to change. But they probably won’t, if only because most voters will forget all about this issue when enough borrowed public money quells the economic jitters. The bottom line is that voters sowed this downfall. The foxes just took advantage.
51 Dave0 // Sep 26, 2008 at 1:40 pm

Getting back to what the WaMu fallout means for Seattle… I’m guessing that a large percentage of the shareholders & debt holders of WaMu that are in the Seattle area. Considering that all of these people’s equity just got wiped out, that’s less money they can invest elsewhere, such as into a down payment on a house. So, it seems like we may see a large hit on the low end of the local real estate market, where first-time buyers have to depend on investments from outside real estate for a down payment (rather than just using equity from their current home). I’d be curious to see if there is any hard data out this related to this theory.
52 Thomas B. // Sep 26, 2008 at 1:56 pm

Dave0 @ 49
Beyond the jobs lost, the people with stock are hurt. I remember a few months ago the news showed a few people that were angry at WAMU and Killinger. They stated that their entire savings or a large portion of their savings was in WAMU stock. These people probably have no money now.
53 Alex // Sep 26, 2008 at 2:00 pm

It’s not just the WaMu jobs going up in flames. Think about smaller companies serving WaMu, like cleaning, office supplies, stuff like that. They will all lose business.
54 Thomas B. // Sep 26, 2008 at 2:01 pm

“WHEN ARE THE CRIMINAL ARCHITECTS OF DESTRUCTION GOING TO BE HELD ACCOUNTABLE!!!!???”

Huh? This is as ambiguous as saying “da man” did it. Should we hold realtors liable for artificially inflating prices, lying to buyers, deceiving buyers, manipulating the housing market, etc.? Should we hold the mortgage brokers liable for extending credit to those with poor FICO scores? Should we hold local politicians liable for fanning the flames of the bubble (and it was a clear bubble) so they can get more tax revenue to use in their pet projects? Who are the criminal architects? It’s “da man” isn’t it.
55 Thomas B. // Sep 26, 2008 at 2:04 pm

Alex @51
Also all the buildings that WAMU owns will go to either JP Morgan, or another buyer, probably out of state. That means the money that WAMU did make on rents and revenues will go to New York instead of staying in Washington.
56 softwarengineer // Sep 26, 2008 at 2:26 pm

SOME AMERICAN HISTORY TO REMEMBER

“…I believe that banking institutions are more dangerous to our liberties than standing armies . . .
If the American people ever allow private banks to control the issue of their currency, first by inflation, then by deflation, the banks and corporations that will grow up around [the banks] . . . will deprive the people of all property until their children wake-up homeless on the continent their fathers conquered . . . The issuing power should be taken from the banks and restored to the people, to whom it properly belongs.” –
Thomas Jefferson — The Debate Over The Recharter Of The Bank Bill, (1809)…”

The rest of the URL:

http://images.search.yahoo.com/images/view?back=http%3A%2F%2Fimages.search.yahoo.com%2Fsearch%2Fimages%3F_adv_prop%3Dimage%26fr%3Dyfp-t-501-s%26va%3Dgreat%2Bdepression%26sz%3Dall&w=383&h=236&imgurl=nwomirror.tripod.com%2Fdepression.jpg&rurl=http%3A%2F%2Fnwomirror.tripod.com%2F&size=14kB&name=depression.jpg&p=great+depression&type=JPG&oid=8911b23a587f864e&no=3&tt=45,827&sigr=10s3iafsn&sigi=113dove05&sigb=136miaguk
57 EconE // Sep 26, 2008 at 2:43 pm

It’s interesting to read who we “bubbleheads” like to hold accountable for the mess we are in. The Prez, Greenspan, Bernanke, Banks etc etc.

Who do you think the people that lose their homes will hold accountable when their day of reckoning comes?

I’d be willing to bet that they are going to place the blame directly with the people that were within arms length of their transaction. You know…the Realtor that found them their “ever appreciating” asset, and the mortgage broker who sold them their “don’t worry…you can refinance out of it” loan.

There are surely going to be quite a few ticked off former homeowners over the next couple years. I sure wouldn’t want to be the person that sold them on the home…or the loan.
58 david losh // Sep 26, 2008 at 3:01 pm

Check out the “Velocity Checking” offer that Verity Credit Union has. You get 5.05% apy on up to $40,000 in the checking account, as long as you use the debit card 12 times a month, sign up for electronic statements, and log into their website once a month. Oh, and they’ll also refund any ATM fees another bank might charge you, so you can use any ATM. If there is a transaction under $5 that I would normally put on my rewards credit card, I just put it on my Verity debit card

This is where the problem is.
It’s your savings in the bank, bonds, CDs, stock market, hedge fund, capital manegement account, and so on. Your money is the problem.
Home loans, or toxic mortgages are nothing in the scheme. People wanting to hold onto the family home I don’t see as the problem.
It’s the large investors of principle who depend on the cash flow to make things look good that are the problem. Investors want to hide behind the savings account holder, the home owners, the pension funds, and 401Ks.
You guys are the schills for Capital Research and Management, and the like, give me a break.
Do you really, honestly think that your $1.5 million dollars in savings spread out over 15 FDIC protected accounts is the focus? No.
These large inter national investment companies will hold onto the principle, the savings they have, in the billions and trillions of dollars until the day you die of starvation.
Capital Research and Management has the money. They have so much money they can take a few billion dollar loss on WaMU.
I know it’s hard, but this is nothing in the bigger picture of global markets.
It’s global.
59 Dave0 // Sep 26, 2008 at 3:28 pm

Sorry David, I’m trying to your last post here, but can’t quite understand what you’re getting at. It sounds important, but like you can’t quite put into words.
60 [troll] // Sep 26, 2008 at 3:30 pm

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61 [troll] // Sep 26, 2008 at 3:35 pm

ll t mns smn cldn’t d mth whn thy bght hm nd ws grdy.

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62 Scotsman // Sep 26, 2008 at 3:36 pm

So, does the loss of WAMU mean that Seattle is no longer a world class city?

WAMU gone, Boeing to Chicago, shipping business to Tacoma, when will MSFT head south?
63 Dave0 // Sep 26, 2008 at 3:39 pm

Don’t worry Scotsman… We have the South Lake Union Trolley! That will ensure that Seattle stays a world class city!
64 joe // Sep 26, 2008 at 3:55 pm

I heard today that there will be some very sizable cuts next week. They were going to occur this week, but they were delayed due to a possible sale.

Also, Chase will move quickly to cut over the next few months.
65 jon // Sep 26, 2008 at 4:35 pm

“That means the money that WAMU did make on rents and revenues will go to New York instead of staying in Washington.”

Most of the money that WAMU ever made went into building now-vacant properties in CA and FL.
66 Dave // Sep 26, 2008 at 5:24 pm

Troll…

Do your posts always look like that?
67 david losh // Sep 26, 2008 at 5:28 pm

Moving your money around to the best new rate, convenience, or solvency isn’t really the issue.
You give your money to a bank, they lend it a hudred times in a month, make money, give you 1/12th of 5%.
While you watch your savings account the principle balances of billions, and trillions of dollars are “invested” by the big players to make more money.
You get your 5% and are happy, but look at the terms and conditions of that “free checking” account, or savings, or CD.

You get 5.05% apy on up to $40,000 in the checking account, as long as you use the debit card 12 times a month, sign up for electronic statements, and log into their website once a month.

It’s a contract for you so you get a fraction of what the bank makes from your money. A loan document is even more complicated.
If you relate this to WaMu, they are making money, today. WaMu has lots of money and it comes in daily. You can be all excited about the jobs or FDIC insured accounts, go ahead.
The main business of WaMU is to collect, bundle, and funnel dollars into Pension funds, Retirement accounts, and Investment instruments. The end resulting dollars earned become the Institutions principle which they never touch. It’s billions of dollars, cash, making interest, daily, or invested in ways to drive the stock market, daily, to make more principle dollars. They won’t touch the principle. They will let the stock holders die of starvation before they touch the principle.
I moved away from calling WaMu a bank a few sentences ago, because they have divisions, within divisions, that trade dollars, then trade dollars with other banks, the fed, foriegn currencies, then send it to a remote location to have it reinvested bank into the Institution.
I’ll challenge any of you to know what WaMu does, because I sure don’t. It is an investment, inside of an investment, that invests, in other investments.
It’s just easier to look at our returns from a “free checking” account.
68 The Tim // Sep 26, 2008 at 5:33 pm

Dave @ 66, I’ll address that.

What you see above in comments # 60 & 61 are a sort of soft-ban I have put on a few people that consistently have come here and left inflammatory / antagonistic comments. When I cracked down with the comment policy I put the disemvoweler ban on these people.
69 Harley Lever // Sep 26, 2008 at 5:39 pm

The sky is falling, the sky is falling!!!

Isn’t this what the Bubble heads want?

I am starting to think that this blog is made up of more anarchists, than renters hoping to buy a house one day. Many of you cheer for revolution, the Greatest Depression, and that this city turn to ruin.

Why not leave? You don’t like Seattle. You hate Microsoft, you hate Boeing, you dismiss everything great about this city. If Seattle is so bad, why do you stay???

The only thing I can think of is because you hope for anarchy.

Why would you want to own a home here if everything you hope for comes true?
70 The Tim // Sep 26, 2008 at 5:52 pm

Harley, I think you are misinterpreting the sentiment. The way I see it, what you call “cheering for revolution and the Greatest Depression,” most here would describe as a necessary dose of medicine to clear out the economic sickness that has been festering and wrecking havoc behind the scenes for nearly a decade.

Is a society and economy built entirely upon a foundation of greater and greater debt a desirable situation that we should strive to prop up at all costs?
71 TheHulk // Sep 26, 2008 at 6:06 pm

Harley,

What do you think is better? An economy where everything grows at a nice uniform pace of 2-3% every year (including housing) or this current boom bust cycle where a few lucky people cash out and for every “lucky” person, hundreds are left holding the bag.

I think of this period as bitter medicine for tough times. While I certainly dont hate any of the companies around here or for that matter around the world, I certainly hate all the people (from people who faked incomes to the wall street analyst who gave AAA ratings to all the MBS’s that passed thru their desks). If any of those people today are jobless and have a home facing foreclosure, I would say it is nothing else but justice for the actions they committed.
72 Harley Lever // Sep 26, 2008 at 6:33 pm

The Tim,

I couldn’t agree more with the need of a heavy dose of medicine for everyone involved. From those who over leveraged themselves to the banks who freely gave credit blindly.

However, when you have comments like “Personally, I’m both cheering for the collapse of our economy, which might spur a revolution, and hoping that I’ll survive it.” form our buddy Demersus. It makes me wonder.

Euala provides some great food for thought, but in the end it seems he would rather be right about his 85% economic collapse predictions than ponder the true devastation of such a prediction.

The Tim your biases in reporting the information seem to always cheer the negative and poo poo the positives. You have stated several times that San Diego is the place to live. Why are you not there? Based on you analysis San Diego is near being an outstanding value. You cannot label people as “Pink Ponies” and claim not to have a bias.

What I would say to you and everyone on this board is that we are all interconnected and have a vested interest in keeping the United States a strong and prosperous nation. If WAMU loses, then we all lose. I too get the short end of the stick. But go back and look through all of your statements and tell me that many of you were not cheering this.

I feel foolish. I bought a house that I can afford, and will now have to help the others who bought way more than they can afford. These people need that hard dose of medicine. But I would never hope for “Revolution” or a “Collapse of our Economy”.
73 deejayoh // Sep 26, 2008 at 7:22 pm

Harley, I wouldn’t assume that everyone who participates on this site agrees with every nut job post that comes up - the logical extension of that approach would have me headed over to Dave’s house tonight to watch “Mean Girls”
74 Ron // Sep 26, 2008 at 7:35 pm

Here it is.. THIS IS HOW THE: Condos are Doing 0 DOWNS STILL.. This is from an insider working at one of the APARTMENT/CONDO Conversions..

effectively..
They are Actually making the DOWN PAYMENT for you.. This is the Senario.

Hypothetically: They WANT 300,000. Dollars for the Unit.
(I Was told in sort of a secret gesture..) that they will get a appraiser to come and comp the Units for extra 3% above what they want. I would imagine it would be easier to get 50+ units to comp out 3% higher.

See FHA Wants a 3% downpayment… FOR EXAMPLE: They get the appraisal to come in at 309,000. dollars - They effectively write the loan down for 309,000. dollars they give the Unit to you Oweing 300,000. - however I didnt get as far as asking if the Actual sales price would show the 309,000.- im pretty sure it would though… KIND OF FUNNY: Giving you extra 9,000. dollars of Equity drawn out of thin air.. You might think this is Fraudulent? maybe- if you could ever prove it.

The other part of the Trick is that FHA from what I was also told wants at least 50% of the Units to be closed on before they will accept the loans..

At this particular Apartment/Condo conversion and probably holds true for most, the Bank lends the money for the Project then also Underwrites the Loans for the Buyers of the Units.. THERE VERY MOTIVATED- To sell them.. they have all the motivation in the world.

(THEY BUNDLE ALL THE LOANS TOGETHER TILL THEY HIT THE 50% MARK)

The HAT Trick happens when they hit the 50% Closure rate then Flip the Loans off to FHA.. Now Taxpayers are footing the bills on the Future Foreclosures.

Aparently they spent 3 months will no sells Until they Switched to using this tactic.. THE POWER OF NOT HAVING ANY SKIN IN THE GAME COMING IN THE FRONT DOOR.. Also the reason there is going to be so many more Foreclosures going forward.

Now the Champaine Apartment/Condo units are using apparently the same tactic.. just weeks ago they were going apartment now they have thrown up the same 0 down on there sales flyers… WE ALL KNOW THERE REALLY ISNT 0 DOWN.. Anymore-.. im sure many of you passed those same type signs as of recently offering 0 Down..

Hopefully I clearly explained it.. Ron.
75 johnnybigspenda // Sep 26, 2008 at 7:39 pm

Harley @ 69… you are getting close. Especially judging by The Tim @ 70’s response.

I used to pop in here quite frequently about a year ago… when the debate was more about “if there was a bubble that would pop in Seattle”…. now its about… well, actually … what IS it about? Looks like a support group for people who are sure of the impending doom and gloom… sitting around and agreeing with eachother.

I agree there is a lot of REALLY BIG stuff going on right now that is important (which are covered very well 100X over), but Tim… your brand (www.seattlebubble.com) is coming into question… Seattlebubble.com will not be useful much longer if you do not take a step back and evaluate where YOUR blog fits into the http://WWW... there are many… please bring something new to the table… sarcasm and cynicism is not cutting it any more.
76 Ron // Sep 26, 2008 at 7:44 pm

I have noticed in Public that people are increasingly feeling that Real Estate is going to be taking a big hit… Just at the athletic club was at the pool and there was a Old guy that I know at as having several rental homes.. he was Going Off- cussing… some of the people left- I thought it was amusing in the sense this guy was now talking about/cussing about his properties potentially being worth less in the future.
77 LUC // Sep 26, 2008 at 7:59 pm

johnnybigspenda,

If you’re not happy with the content on this blog no is stopping you or anyone else from from starting their own blog. The blogosphere is an open environment.
78 Harley Lever // Sep 26, 2008 at 8:06 pm

Deejayoh,

Your (Bubbleheads) silence when the nut jobs make these statements is peculiar. Many of you vehemently debate those who do not agree with your position, no matter how passive. Yet when some one actually cheers on “economic collapse” and “revolution” they get a complete pass. Sometimes what you do not say, says a lot more than what you do say.

I agree with and understand much of the anger. I among the most cynical when it comes to mortgage companies and some of their actions. I was actually in the process of getting a loan that was predatory and fraudulent. The loan officer tried to manipulate the situation from every angle financially, emotionally, and deceptively. I walked away 4 days before we closed.

In a way I wish the absolute worst for that loan officer. However, to wish poorly upon him or hope that his bank will close is short sighted. We are all interconnected in this mess. In the least a micro-fraction of my taxes would go to supporting his unemployment. Even worse, thousands of people would be out of work.

To cheer for revolution and economic collapse or to give the statements a free pass with your silence is to cheer for your own demise.

What do the Bubbleheads see as the end game? Do you think having the economy collapse is an opportunity to buy the home of your dreams? Even if you keep your job, might you be obligated to help a loved one or support a parent? I hear of very few stories about how many millionaires the Great Depression turned out.
79 Harley Lever // Sep 26, 2008 at 8:14 pm

Ron,

Rental rates are going up. Assuming he is not stuck in an ARM, he should be delighted by the downturn in real estate. You do not often flip rentals.
80 kingcounty homeowner // Sep 26, 2008 at 8:26 pm

Folks; Life is not fair and it sure sucks if you are not at the top of the food chain.
Kerry Killenger (CEO of WAMU from 1990 to 2008) got paid $54 million from 2002-2007. Alan Fishman (CEO of WAMU for less than a month) is ‘entitled’ to $18 million in pay and bonuses.
The rank and file WAMU thrift workers, whose 401k’s and stock options were wiped out, get to walk away with such largess.

Here are the links for the 2 articles on the CEOs salaries:
http://finance.yahoo.com/tech-ticker/article/73916/WaMu-Wipeout-%27Gross-Mismanagement%27-by-Former-CEO-Killinger?tickers=WM,JPM,BAC,C,XLF,WFC,WB

http://www.associatedcontent.com/article/1066149/wamu_ceo_alan_fishman_gets_18_million.html
81 expat // Sep 26, 2008 at 8:38 pm

http://jp.youtube.com/watch?v=H5tZc8oH–o&eurl=http://www.powerlineblog.com/
82 Sniglet // Sep 26, 2008 at 8:44 pm

What do the Bubbleheads see as the end game? Do you think having the economy collapse is an opportunity to buy the home of your dreams?

I do not relish a depression, but I do believe one is necessary. This is the only way to purge the gross mal-investments from the global economy, and teach society the old lessons of prudent investing and saving.

Frankly, I have been disgusted by the superficial consumerism that has come to embody society. I am looking forward to my children growing up in a world where people aren’t competing for who has the most, and friendships matter more than status.

By the way, I am NOT predicting the appocalypse. Rather, I suspect we will simply have a severe depression. The world didn’t come to an when Japan’s economy tanked in the 1990s, neither was it really all that terrible during the 1930s. 80% of Americans still kept jobs during the depression, and lived fulfilling lives. My grand-father tells stories of the tough, but rich, childhood he had on a farm in the Canadian prairies in the 1930s. I can only hope my children will have similar experiences.
83 jon // Sep 26, 2008 at 8:55 pm

The US was not destroyed by the depression, but much of the rest of the world was not so fortunate. As a result of the political instability created, many tens of millions of people were killed. We have exactly the same rhetoric coming out of Iran that was coming out of Nazi Germany, and we haven’t even begun the actual painful part of a depression. Pakistan is a nuclearized powder keg that is ready to blow a lot more than just a hotel. China is already seamingly at a low level trade war with us, having just cut off interbank loans with all US banks, continuous probing with internet attacks, and the military threats against Taiwan. Russia has attacked Georgia, is moving towards to laying claim to the Arctic, and is prepared to use natural gas supplies to Europe as leverage.

A credit crisis is peanuts compared to what else is out there.
84 Jonny // Sep 26, 2008 at 8:56 pm

“A credit crisis is peanuts compared to what else is out there.”

Not this one.
85 Jonny // Sep 26, 2008 at 9:19 pm

Harley: I have been expecting this collapse for many years now and it should have been obvious to anyone who can do basic math as far back as 1996. In particular, it should have been bloody obvious to one Alan Greenspan, the chief culprit in the entire mess. None of this is to say I’m “cheering for collapse” (although I’ve been against all the irrationality for years because I knew it would lead to this). Who wants collapse? (definitely a better question to have asked in 1996!) What I do cheer for is sanity, truthfulness and honesty leading to real growth and prosperity (as opposed to lying, cheating, twisting the truth and printing scads of worthless paper). It is not sane, truthful or honest to look at the present situation and expect anything other than a serious and prolonged collapse. Whether one plan or another will ease problems for one group of people or another is perhaps debatable, but in the end no bail-out of any size will fix this in a few months as there is just no way around the mess now. That said: In my opinion, failing to take this seriously enough (and as a long-term problem with no quick fix) will only leave us unprepared for what’s to come. In fact, it’s precisely all this whistling-past-the-graveyard insanity of the past 10-15 years that is actually _responsible_ for the situation we’re in. We don’t need more denial now! But in any case, what people hope or don’t hope is irrelevant now. It’s down to nuts and bolts and pure and simple math that cannot be wished away by magical risk-erasing derivatives or balance sheet shenanigans. We’re now a debtor nation with a giant pile of worthless paper (who are only (temporarily) avoiding full-on governmental bankruptcy ala Argentina because the world economy would be at risk if we went bankrupt) and it will take YEARS to turn things around. And because we’re now backed into the corner we started towards in 1996, we must and WILL finish the inevitable cycle: fear, anger, acceptance, depression. Only then can the destructive phase end and the growth phase begin again. This is how it has been for centuries and this time will be no different. You can hope all you want, but you will only be disappointed. Get angry if you want, but you’re ahead of the crowd as we have not reached the end of the “fear” phase yet and I think people will be angry for years after fear peaks in 2009. Until they get tired of it and sink into the inevitable depression. The bright side of it: if we accept the consequences of our past actions and get to work now (collectively and as individuals), we don’t have to stay depressed too long.
86 jonness // Sep 26, 2008 at 10:37 pm

“The Tim your biases in reporting the information seem to always cheer the negative and poo poo the positives. ”

Harley: This is the worst financial crisis since the great depression. Bubble heads have been realists about this situation since well before it began. We are not mocking Seattle, we are simply talking in a non-delusional manner about the current state of the economy and what must happen before the situation is corrected. Once it’s corrected, we can attempt to salvage this country from the ruin caused by blind nationalistic bias fueling the constant need for our country to borrow more and more money it can’t afford to borrow.

The situation is very easy to understand. Say you borrow more money than you earn for a few decades until you reach a point that a great deal of your salary must be used to pay interest on the huge amount of money you borrowed. But instead of admitting you have a problem, you keep your eyes closed and call anybody “negative” who mentions that you should stop borrowing money. After all, as long as you borrow more money, you live like a wealthy man while making a peasant wage. You have new homes, new cars, and a yard full of shiny new toys.

But you can’t get over the feeling that things are getting out of hand, because you are borrowing much more money to pay interest on the money you already borrowed than you started out borrowing in the first place. Then suddenly the big picture hits you. You are broke, and you will spend the rest of your life paying for the toys you bought. The worst part is, the toys will be old, worn-out, and in the graveyard before they are payed for. You will never have new money again, because you have borrowed everything you will be worth for the next 30 years, and all’s that’s left is 30 years of cashless toil. You are tapped out.

The situation above is hypothetical, but it’s absolutely the shape the U.S. is in both as a nation and for many on the individual level. We live way beyond our means as a nation, and we do so by borrowing way more money than we make. The price for this is higher taxes and huge debt as opposed to low taxes and money in the bank. We are not just facing a housing bubble, we are facing a debt bubble. And so far, our best plan to solve the debt bubble is a speedy decision by our nation’s policy makers to borrow an unprecedented amount of additional money.

We owe about $11 trillion as a nation. There are 150 million people working in the U.S. That means my GF and I owe $73,333.34 so far, and that figure is rapidly going up each year as our nation continues to spend more than it earns.

Now borrowing another trillion here and there to give to rich bankers who made a booboo doesn’t seem like a big deal to most people, but each additional trillion equates to another $13,333.34 my GF and I are obligated to pay back (or at least service the debt on) on top of what we already owe. This amount of debt multiplied by all families in our country is staggering and threatens to bankrupt the nation. Now throw in the $90 trillion in obligations to Social Security and Medicare I purposely left out of the discussion, and ask yourself just how much more we can actually afford to borrow.

America is a drug addict as are its citizens, and the drug of choice is credit. As any good drug councilor knows, one of the main symptoms of addiction is denial. And until the addict breaks out of denial, he has a 0% chance of healing and assuming a healthy balanced lifestyle. The bubble-heads have broken out of denial ahead of the pack and are anxious to embark upon the painful process of beating addiction so that we may reap the enormous benefits on the other side.
87 deejayoh // Sep 26, 2008 at 10:39 pm

Harley - well, I’d watch who engages who. you know that quote about wresting pigs? I learned what it meant a while ago.
88 jonness // Sep 26, 2008 at 11:01 pm

My math is a little fuzzy there: I should say the sum of my GF and my debt is about $146, 666.00 and going up $13,333.00 per additional trillion of debt. And this doesn’t include up to $1,200,000.00 in Social Security and Medicare obligations we are on the hook for.

Personally, I’m not convinced the average family is going to be able to pay for these kind of debt obligation. But who knows, maybe borrowing another trillion or two to give out as Christmas bonuses to rich bankers and corporations isn’t bad for the country after all? Time will tell.
89 what goes up must come down // Sep 27, 2008 at 12:50 am

harley, man do you take the cake, why don’t you go back a read some of your old posts — you know the ones in which you tried to convince people there wasn’t a bubble in the first place.

Now that the house of cards has started to come down you blame the people who were trying to point out to others THAT IT WAS A HOUSE OF CARDS.

See some people take glee in this situation which I don’t believe is right but those people are most likely the ones you mocked as crazy just a few months ago and so they have this over reaction.

Why don’t you take some responsibility by saying that you were wrong and if more people would have been standing up and saying hey what is going on doesn’t make sense. How can housing anywhere start out stripping incomes by factors of 10 make any sense? See if people questioned things more early on maybe we wouldn’t be in this mess.

But no you want to blame the people who tried to stop the wreck because they WERE THINKING. Why don’t you look in the mirror and think YOU were part of the problem. Guess what you can blame anyone you want but now it is time to pay the piper and your belly aching can’t stop it.
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