WaMu's Failure: Why It's Unusual, What's Next

Last night's failure of Washington Mutual (WM Quote) was a surprise in three respects.

First, JPMorgan Chase (JPM Quote) acquired all of the failed thrift's branches deposits, including balances exceeding FDIC insurance limits. With so much in the way of option-payment adjustable-rate mortgages and other low-quality mortgage loans on the books, it's a bit of a miracle for the FDIC's insurance fund that JPMorgan paid $1.9 billion for all of Washington Mutual's branches, deposits and loans.

JPMorgan announced it would write down the acquired loans by about $30 billion and raise $10 billion in new capital by offering 246.9 million shares of common stock at a price of $40.50. JPMorgan shares were trading at $44.02 early Friday afternoon. ...