Consumer

  The failure of Washington Mutual is the largest bank failure in US History, and as the bank was the fifth-largest in Florida and the third-largest in South Florida, many Floridians had a business relationship with WaMu. What now? CBS4.com set out to find the answers to the top questions people might have about the failure.

Is my money safe?
Under the terms of the sale, JP Morgan has agreed to completely meet all obligations to depositors. That means money deposited in Washington Mutual is not at risk, even if it exceeds the $100 thousand FDIC guarantee per account. The sale of the bank, which regulators had determined was unsound, actually leaves customers in a more secure position.

Will my bank branch be open?
All branches will be open at their normal time. As this was a sale, not a bankruptcy or liquidation, banking services should consider without interruption.

Do the ATM's work?
Your branch ATM and your ATM card should work normally.

I have a WaMu credit card. Is it OK?
It should be accepted normally up to your credit limit.

What about my checks?
Your Washington Mutual checks will still be valid under the terms of your account. It is possible because of the news about the failure that some merchants may be reluctant to accept WaMu checks. The FDIC suggests having reluctant merchants contact your branch for reassurance.

I have bank services like a safe deposit box, and use wire transfers.
Bank services such as this will continue as normal, according to the FDIC.

My check goes into my account via Direct Deposit. Do I need to notify my employer?
No. Direct deposit and all automatic transfers using what's known as ACH (automated clearinghouse) will continue uninterrupted.

I got a WaMu Credit card offer in the mail. Can I still accept it?
The bank's new owners will set their own credit policies. You should contact your branch for information about obtaining a loan or a credit card.

Will the name of the bank change?
Eventually, but not immediately. JP Morgan said it will take a year or more for all WaMu branches to become Chase branches. Chase is JP Morgan's commercial banking brand.

Will my branch close?
In the short term, no. But as JP Morgan examines branch locations and the bank's business in Florida, it may make decisions about branches in the future. For now, it's business as usual.

I work for WaMu. Do I still have a job?
In the short term, yes. However, a new owner often means changes in staffing. There is no guarantee any specific position will be kept, but JP Morgan has not made any statement about adjustments to staff at its new branches or support offices

I have a loan with Washington Mutual? Do I still have to pay?
Yes. Your loan is still valid, and all payments for consumer loans, credit cards and mortgages must be paid as scheduled in the same way, and to the same place.

What about interest rates for loans and deposits?
Where they are not specified by contract, such as a fixed rate mortgage or a guaranteed rate term CD, they should remain unchanged. Variable rates could possibly be changed by the new owner. Interest rate reviews are expected to begin immediately.

I have stock in Washington Mutual. What now?
The stock closed at $1.62 Thursday, but in after-hours trading it fell to 45 cents a share. As this was a sale, and not a bankruptcy, shares will retain some value, but what that will be only time will tell.

Why was Washington Mutual sold?
The immediate cause was the large number of deposits which were leaving the bank. In the last 10 days, federal regulators said the bank lost $16 Billion in deposits. The Office of Thrift Supervision (which regulates Savings and Loan institutions like Washington Mutual) said the bank had insufficient liquidity to meet its obligations and was "in an unsafe and unsound condition to transact business."

The long-term problem was that the bank led the nation in a type of risky adjustable rate mortgage, the option ARM. Rising rates left people unable to pay, and the bank had $53 Billion of these loans, many in foreclosure. South Florida had the highest rate of delinquencies in the areas served by Washington Mutual, with Miami-Dade being the worst. Almost 13% of the bank's Miami-Dade loans were in serious trouble.

What if the bank had not been sold?
The FDIC would likely have stepped in and run the bank in the short term, and without a buyer WaMu could have been liquidated. Large depositors could have been placed at risk of not getting full value for their deposits. The FDIC would have been forced to use it's insurance fund to pay some depositors. Overall, WaMu customers would have seen significant disruptions and the government would have seen additional expense.

How will this affect South Florida banking?
Washington Mutual was the third largest bank in South Florida, behind Wachovia and Bank of America. It was the fifth largest bank in Florida. The sale makes JP Morgan Chase a major banker in Florida, and one of the largest banks in the nation.

Why would JP Morgan buy WaMu if it was in such trouble?
Because the feds seized the bank and auctioned it off, they sold only the assets, not the liabilities. JP Morgan gets the deposits and the profitable, well performing loans, but losses and failed loans remain with the holding company, Washington Mutual Inc., which JP Morgan did not purchase.

What did the sale cost?
JP Morgan paid the feds $1.9 million to assume deposits, branches, and a portfolio of loans with a total value  of $176 Billion. Even if some of that loan portfolio fails, and JP Morgan believes as much as $30 billion will be written off, it is still a good deal.

Sources: FDIC, Office of Thrift Management, Associated Press

(© MMIX, CBS Broadcasting Inc. All Rights Reserved.)

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