How the Washington Mutual Takeover Will Affect Consumers

The government seized banking giant Washington Mutual last night and then sold some pieces of it to JPMorgan Chase for approximately $1.9 billion.

The failure of the Seattle-based bank Washington Mutual undermined confidence in a fresh clutch of US household names today, as investors digested the implications of the biggest collapse of a high-street bank on record.

Washington Mutual, which was bought by JP Morgan after being seized by the US authorities late yesterday, had a stockpile of controversial “option ARM” mortgages which allow borrowers multiple options in setting the level of their own repayments.

These flexible loans, which were popular at the height of the housing boom, have proven to be huge liabilities for banks, and other firms known to hold them saw their stock prices plummet today.

http://www.guardian.co.uk/business/2008/sep/26/banking.creditcrunch1

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