Cash taps opened, WaMu closed

Central banks pump cash into a lending wasteland. Washington Mutual logs the largest-ever bank failure, and JPMorgan scores a deal. And local banks are having a better go of it than their larger brethren.


Central banks man the cash pumps

With the U.S. bailout plan stalled, central banks around the world pumped billions of dollars into money markets today, to try and ease a drought in lending. The European Central Bank and the central banks of England and Switzerland injected $74 billion in U.S. dollars, and Japan and South Korea’s central banks also put up cash. (Reuters) The U.S. Federal Reserve boosted the amount of dollars it can lend to foreign central banks, to $290 billion. ( Government bond yields also rose. “It’s gloomy because the bailout package was seen as the cavalry coming over the hill,” said Richard McGuire at RBC Capital Markets in London. (Bloomberg) Oil, on the other hand, fell below $105 a barrel on the bailout doubts. (AP in Yahoo! Finance)

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Washington Mutual falls, JPMorgan pounces

Federal regulators took control of Washington Mutual, in by far the largest bank failure in history. JPMorgan Chase agreed to buy almost all its assets, which total $307 billion, for $1.9 billion; JP Morgan will absorb at least $31 billion of soured mortgages and credit card debt. Washington Mutual depositors won’t be affected, but its shareholders and some bondholders will lose their investment. (The New York Times) Washington Mutual depositors withdrew $16.7 billion since Sept. 16. JPMorgan is now the largest U.S. bank, by deposits. (Bloomberg) JPMorgan CEO Jamie Dimon "is clearly feeling that he has an opportunity to grab market share, and get it at fire-sale prices,” said Matt McCormick at Bahl & Gaynor Investment Counsel. (Reuters)

RIM has good quarter, expensive future

BlackBerry maker Research In Motion posted strong quarterly earnings, with a 72 percent jump in profit, to $495.5 million, and an 88 percent leap in sales, to $2.58 billion. However, its shares dropped 19 percent in extended trading on warnings that a jump in marketing spending, to push holiday sales of a new line of BlackBerrys, will crimp profit margins. (The Wall Street Journal) “Apple is really pushing the envelope and now RIM is responding with higher-quality displays and touchscreens,” said JMP Securities analyst Samuel Wilson, and that’s pushing up costs. RIM added 2.6 million subscribers in the quarter, easing fears that it will be hit hard by trouble in the BlackBerry-dependent banking sector. (

Small, and loving it

Smaller banks across the U.S. must have missed the memo about the credit freeze, as they continued making loans like normal. In fact, while total bank borrowing from the Federal Reserve rose to a record $262 billion last week, some local banks said they were benefiting from the troubles at their larger rivals. Depositors and qualified loan-seekers are turning to their community banks, apparently looking for relative safety and stability. “We collect money from local savers, and we lend it in the local community,” said William Dunkelberg, the chairman of Liberty Bell Bank in Cherry Hill, N.J., and the chief economist for the National Federation of Independent Business. “We’re doing fine.” (The Washington Post)

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