Updated from 8:23 a.m. EDT

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JPMorgan Chase ( JPM - Get Report) struck a deal Thursday night to buy all the deposits, assets and certain liabilities of Washington Mutual's ( WM - Get Report) banking operations after the Seattle-based company was seized by regulators.

The takeover, arranged by the Office of Thrift Supervision and the Federal Deposit Insurance Corporation, excludes the senior unsecured debt, subordinated debt and preferred stock of Washington Mutual's banks. JPMorgan Chase won't acquire any assets or liabilities of the banks' parent holding company or the holding company's nonbank subsidiaries.

As part of the transaction, JPMorgan Chase will pay the FDIC about $1.9 billion. Washington Mutual was once the largest U.S. thrift, and its failure is the biggest ever for a domestic bank.

This is the second time this year JPMorgan has come to the rescue of an ailing financial giant. In March, it bought Bear Stearns after the investment bank nearly collapsed.

The acquisition of Washington Mutual's banking operations should add to earnings immediately and boost profits by more than 50 cents a share in 2009. JPMorgan Chase expects to incur pretax merger costs of about $1.5 billion while achieving annual pretax cost savings of roughly $1.5 billion by 2010.

Before being salvaged, Washington Mutual had been teetering for months, and its downfall makes it the latest financial institution to be undone by the housing slump and credit crisis.

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Since the beginning of September alone, the government has rescued Fannie Mae ( FNM), Freddie Mac ( FRE) and AIG ( AIG - Get Report), Lehman Brothers has filed for bankruptcy, Merrill Lynch ( MER) was purchased by Bank of America ( BAC), and Goldman Sachs ( GS - Get Report) and Morgan Stanley ( MS) decided to become bank holding companies.

Alongside those developments, 12 U.S. banks failed this year before the government intervened at Washington Mutual. Because of the turmoil, Treasury Secretary Henry Paulson and others proposed a $700 bailout of the financial sector, on which Congress was expected to vote this weekend, but now its approval appears to be in doubt.

In conjunction with the Washington Mutual acquisition, JPMorgan Chase will be marking down the acquired loan portfolio by about $31 billion, which primarily represents the company's estimate of remaining credit losses related to impaired loans.

"This deal makes excellent strategic sense for our company and our shareholders. Our people have worked hard to build a strong franchise and balance sheet -- making this compelling transaction possible," said Jamie Dimon, chairman and CEO, in a press release Thursday night. "As we have said in the past, increasing our regional banking presence not only strengthens our retail business but also benefits other business lines across our firm, including our commercial banking, business banking, credit card and asset management groups."

JPMorgan Chase expects to convert Washington Mutual's consumer banking, home lending and credit card businesses to the Chase brand and technology platforms over the next two years.

The acquisition expands Chase's consumer branch network into California, Florida and Washington state and creates the nation's second-largest branch network. The acquisition also extends Chase's retail branch network to additional states, including Georgia, Idaho, Nevada and Oregon.

At the same time, JPMorgan Chase said it priced a $10 billion offering of nearly 247 million common shares at $40.50 each. On Thursday night, the company said it would seek to raise $8 billion, meaning the sale brought in $2 billion more than planned.

Shares of Washington Mutual were giving up nearly all of their remaining value, plunging 90% to 16 cents. JPMorgan Chase was up 6.7% to $46.38.