Washington Mutual : The Great Depression Deepens Essay

1645 WordsNov 29, 20167 Pages
1930: Washington Mutual makes the first of many acquisitions, rescuing Continental Mutual Savings Bank from financial distress as the Great Depression deepens. The possibility of a bank run and failure of one of America’s largest banks was an event that citizens of The United States of America did not see in their near future, let alone on September 25, 2008. On that day, Washington Mutual was seized by the FDIC and sold to J.P. Morgan for $1.9 billion. Events leading up to this significant date in history were those that also contributed to the burst of the real estate bubble. Prior to 2006, companies including Washington Mutual saw a potential in the real estate market and decided to take advantage of the profits that could be obtained by becoming apart of this market. At this time, Washington Mutual decided to expand and focus their business more on real estate in an effort to increase profits. To also help increase profits, Washington Mutual’s CEO at the time, Kerry Killinger, brought up the strategy of increasing risky lending and for the company to get into the subprime loan market. At this time multiple banks and companies were using this strategy, just not in the way that Washington Mutual was. The company began underwriting income loans and not providing sufficient evidence on the borrower’s income as well as providing thousands of option ARMs to borrowers. Option ARMs is a type of mortgage that many borrowers did not quite fully understand during this time which

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