700 Billion Dollar deal reached

It looks as though a deal has been hammered out and is expected to go before both Houses for vote on it in the coming days. The deal will allow the U.S. Treasury to spend up to $700 billion on the purchase of bad debts and junk mortgages from failing banking institutions in the US.

Both the Democrat and Republican leaders are backing the deal. Bush has also announced his support for the deal.

The original proposal had strong language that would have given Henry Paulson unparalleled control over how and when the $700,000 would be spent and no way to hold him accountable for it. In the revised version the “Blank check” aspect of it has been removed or at least reduced.

The “Golden Parachutes” have been clipped in the revision. Bank executives will not be allowed to take huge bonus payments when they leave. In addition standard pay will be limited.

Banks will have to swap stock for monetary assistance. All profits on the surrendered stocks are to be returned to the taxpayers on any recovery by the banking institution. The banking industry will have to help finance the bailout if the money can not be recovered from the struggling banks themselves.

Banks will be obliged to join an insurance program to protect them against the losses of mortgage backed securities.

Both the House of Representatives and the Senate are expected to vote on the Act of Emergency Economic Stabilization 2008 in the next few days. Possibly as early as Monday.

Expect to see positive reaction on Wall Street in the morning on Tuesday.

WaMu Bank is no more

Washington Mutual Bankhas collapsed. The largest financial institution in America is no more. WaMu was the largest Financial institution in the world which affords them a place in history as the Largest Financial Institution to collapse in the world.

The Government has seized control of Washington Mutual bank. One of the major symbols of the Mortgage boom crazed financial has already started to have assets sold off at a Government fire sale. The majority of WaMu has been sold of by Government Regulators to JP Morgan Chase who bought all WaMu’s deposits and banking assets for $1.9 billion after having offered to buy WaMu for $7 billion in stock earlier this year. The remainder of WaMu’s financial and Banking operation will be operated by the Government.

The majority of WaMu customers are not expected to be affected as the FDIC insures deposits up to $100,000 per account, however share holders are more or less wiped out.

JP Morgan Chase will take control of all 2,300 branches of WaMu officially Friday morning. In addition to WaMu’s standard banking JP Morgan Chase will also gain control of WaMu’s Mortgage division and credit cards as well as all deposits. JP Morgan Chase took over $134.7 billion in deposits from WaMu. JP Morgan Chase is expected to close 10% of the branch locations. The full integration of WaMu into JP Morgan Chase is expected to be completed by 2010.

Meanwhile WaMu employes were reportedly notified to report for work as normal this morning.

JP Morgan Chase will now have 5,410 branches in 23 U.S. states running from coast to coast, as well as be the largest U.S. credit card business. This pushes them past Bank of America to the rank of second largets bank sitting just behind Citi Group who is currently in the number one spot. JP Morgan Chase is spread over 60 countries and controls assets valued at over $2 trillion dollars. Further information on JP Morgan Chase is available at JPMorganChase.com