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Why Some Big Banks Have Hung On While Others Have Failed

Posted by billspaced | 5:01 AM | , , | 0 comments »

WaMu (WM) is the biggest thrift in the country with somewhere near $150 Billion in deposits. There's been a lot of talk lately about its imminent failure. Here's an article from CNNMoney that shows why WM has hung on longer than its investment banking brethren, namely Bear Stearns, Merrill Lynch, Lehman, and Morgan Stanley. I list two articles because, as I write this, the CNNMoney link is not working. However, Google's cached version gives the same story.
Investors now realize that an investment bank's financial health is tied directly to how many active customers and clients that bank has. But investment- banking customers' accounts aren't insured by the government - and when Lehman's, Bear's and even Merrill's trading partners started heading for the exits, more quickly followed to avoid losing their assets.
Customers at retail banks like WaMu, however, aren't so quick to head for the door, as the government's Federal Deposit Insurance Corp. insures all deposits up to $100,000. For most bank customers, therefore, a traditional bank failure is more inconvenience than catastrophe.
Here's a little-known fact: The average retail bank account balance at WaMu is $5200. They will have no problem funding that for the few folks who panic and want their money. Now that the government has helped to avert a financial calamity (at least for the time being), all of this might be moot. But it's worth knowing just in case (when) it happens again.

Why WaMu Has Hung On Longer Than Lehman Or Bear

Google's cached version

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