Washedup Mutual

Pretty scary news this morning, again, Washington Mutual was seized by the FDIC and sold to JPMorgan Chase for $1.9 billion, a complete fire-sale price. Since last Monday, WaMu has quietly lost nearly $17 billion in deposits as people have gotten their money out.

Now the question is what do the people who have their money still in WaMu do?

I'm hoping nothing. I'm hoping it's business as usual as the FDIC says. That is most likely going to be wrong.

I just don't see how there's not going to be a major bank run on WaMu's remaining assets now. This is the same government that 36 hours ago warned of dire economic consequences if there was no bailout deal. If even one percent of WaMu's remaining creditors head to cash out, it's going to be a nightmare. The bank just doesn't have that amount of physical cash on hand. No bank does. No bank keeps that much cash around, it's all electronic numbers.

My honest fear is that this morning there's bank runs at WaMu's remaining branches. Look, people are, well, stupid at times. They collectively panic. I know how I would feel if my bank was WaMu right now. I would have been one of the people that got their money out last week.

Even worse, this bank run panic spreads to other banks. More of them are going to start to fail. more of them have to be rescued by the FDIC until the FDIC has to be rescued, that's the next big domino to fall.

And the really scary part is I believe after the bailout deal, whatever form it takes, is signed...the banks will fail anyway.