U.S. & World News

NEW YORK (CBS News) ― JPMorgan Chase & Co. has struck a deal to acquire the deposits and some of the branches of Washington Mutual Inc., which has been battered by soured mortgages, CBS News has confirmed.

The deal will cost JPMorgan Chase $1.9 billion. The Federal Deposit Insurance Corp., which insures bank deposits, said it would not have to dip into the insurance fund as a result of the seizure.

The Wall Street Journal broke the news earlier Wednesday and, citing people familiar with the matter, reported the deal brokered by the government will not impact the FDIC insurance fund.

The Seattle-based thrift, the nation's largest, has roughly $310 billion in assets and was searching for a lifeline after a credit-rating downgrade further raised questions about its future.

JPMorgan has scheduled a conference call for 9:15 p.m. ET Thursday.

Ravaged by losses from soured mortgages, WaMu has seen its stock price plummet by 87 percent this year. Major foreign and domestic investment banks for weeks have been dancing around the possibility of an acquisition but are likely holding out to see how much WaMu would have to write down the cost of its bad loans — and the potential impact on its already thinned balance sheet.

Because the bailout plan calls for the government to buy billions of dollars of troubled mortgage-backed assets, it could have a positive effect for WaMu. Last week, a sale of the Seattle-based thrift — with its roughly $310 billion in assets — appeared almost imminent, as Goldman Sachs Group Inc. was brought in for assistance.

Wells Fargo & Co., Citigroup Inc., HSBC, Spain's Banco Santander and Toronto-Dominion Bank of Canada all had been mentioned as possible suitors.

Playing a less visible role in the possible courtships are WaMu's federal regulators — the Office of Thrift Supervision and the Federal Deposit Insurance Corp. They hold the club of possibly closing down the bank if warranted, but also want to find a resolution that involves the least cost to the taxpayers.

"It seems to me that the private equity route was closed to (WaMu) two or three weeks ago," said Bernie McGinn, president of McGinn Investment Management based in Alexandria, Va. "I think the world changed once the government said they were going to step in."

From WaMu's standpoint, it would seem that private equity is the way to go given the thrift's share price, which lost more than 25 percent Thursday to close at $1.69. "The bank would be allowed to survive and allowed to get healthy again," McGinn said.

WaMu approached private equity powerhouses Carlyle Group LLC and Blackstone Group LP about a possible deal although others remain in the mix, The Wall Street Journal reported Thursday.

A WaMu spokeswoman declined to comment Thursday on rumors or speculation. A Carlyle Group spokesman also declined to comment, and representatives for Blackstone and Gerald J. Ford, the chairman of Hilltop Holdings, were not immediately available. Ford, a Texas billionaire and bank turnaround specialist, was reported to be working with Carlyle and Blackstone on a deal.

On Wednesday night, credit rating agency Standard & Poor's cut WaMu's counterparty and preferred stock rating further into junk status, noting an increased likelihood that any sale of the thrift would only be done in piecemeal fashion.

The thrift assured customers that S&P action doesn't affect the safety of customers' deposits, which are insured by the FDIC up to $100,000 for individual deposit accounts and $250,000 for individual retirement accounts.

Some Washington Mutual customers were split on the bank's future.

At a branch in the Chelsea neighborhood of Manhattan, retired lawyer Laura Donnelly said she plans to move her funds elsewhere though she hasn't yet decided which bank would be a safe bet. "It's anyone's guess at this point what will happen with any of them," Donnelly said.

But 28-year-old Omar Ramirez said he wasn't worried about the money in his WaMu checking and savings accounts, because they fall below the limits insured by the FDIC.

"I know my money is safe and protected, no matter what this bank decides to do," Ramirez said after depositing a check.

A world away, hundreds of nervous customers swarmed Bank of East Asia offices in Singapore and Hong Kong on Thursday, the second day of Asia's first major bank run since the global financial crisis erupted a year ago.

President Bush told Americans Wednesday night that the "FDIC has been in existence for 75 years, and no one has ever lost a penny on an insured deposit, and this will not change."

The federal deposit insurance fund, now at around $45.2 billion, was tipped below the minimum target level set by Congress by the failure in July of Pasadena, Calif.-based IndyMac Bank, which cost $8.9 billion.

A Washington Mutual failure would dwarf the largest bank collapse in U.S. history — Continental Illinois National Bank in 1984, with $33.6 billion in assets. WaMu and its subsidiaries had assets of $309.73 billion as of June 30, and IndyMac had $32 billion when it was shuttered.

FDIC Chairman Sheila Bair has not ruled out the possibility of going to the Treasury for a short-term loan for working capital at some point. That last happened in the early 1990s. But Bair does not expect the FDIC to take the more drastic action of using a separate $30 billion credit line with Treasury for long-term loans - something that has never been done.

Next month, Bair plans to propose increasing the premiums paid by banks and thrifts to replenish the fund. That plan is likely to be approved by the FDIC board. It is scheduled to be presented at a board meeting on Oct. 7, FDIC spokesman Andrew Gray said Thursday.

When large institutions have failed in recent years, the hit to the fund has been about 5 percent to 10 percent of the bank's assets, according to FDIC officials. In WaMu's case, that would be up to roughly $31 billion.

But experts say it's impossible to predict because of unknown factors such as the amount of loans that institutions may have gotten as advances from the Federal Home Loan Bank system, which must be repaid.

(© 2009 CBS Broadcasting Inc. All Rights Reserved. This material may not be published, broadcast, rewritten, or redistributed. The Associated Press contributed to this report.)