25 September 2008: Washington Mutual becomes the largest US bank failure
Federal regulators seized Washington Mutual after a wave of deposit withdrawals and sold its banking operations to JPMorgan Chase for about $1.9 billion. With roughly $300 billion in assets, it was the largest bank failure in US history. Depositors were protected, but shareholders and many bondholders were wiped out. WaMu had grown aggressively on risky home loans that went bad.
The lesson: Aggressive lending in a boom can wipe out shareholders when the cycle turns.
What it meant for investors
$1,000 in Washington Mutual at the start of 2008 → $0 today, vs $4,626 in the S&P 500.
We start the clock at the start of 2008, the year it happened. Washington Mutual went to zero, so the position is worth nothing at all; the index turned the same money into $4,626.
What Washington Mutual teaches: A lender's product innovations in a boom deserve skepticism; loans designed to make payments affordable now can create losses later.
| Bought in | Price then | Worth today | S&P 500 would be |
|---|---|---|---|
| 2005 | $40.00 | $0 | $5,763 |
| 2007 | $45.00 | $0 | $4,789 |
| 2008 | $14.00 | $0 | $4,626 |
green = beat the S&P 500 · red = lost money
What if you bought Washington Mutual? Every starting year and the full story →
Could you have called it at the time? The wheel picks the year, you pick the position, ten seconds a pick.
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