Should you take your money out of WaMu?
Filed under: Ask WalletPop, Banks, Saving Money
I live in Portland, Oregon, and a lot of my friends have accounts with Washington Mutual, given its roots in the Pacific Northwest (WaMu was founded in Seattle over 100 years ago). Most of my loved ones' accounts aren't anywhere close to FDIC limits. But I've been getting the question almost every day: Should I take my money out of WaMu?
[Update, September 25, 10:30 p.m.: Tonight's takeover of Washington Mutual by J.P. Morgan may negate this advice; tellingly, $16.7 billion of your deposits were taken out in the past 10 days.]
The responsible capitalistic economist in me says "no" but the objectivist says "yes." And if I was talking to my closest friends and relatives, and not the U.S. as a whole, here's what I'd argue: sure, the last thing that would be sensible would be for every WaMu accountholder to panic and take his or her money out. We'd be left with way more than the crisis we have today; the FDIC wouldn't have assets enough to pay all the accountholders and there would be an awful mess (requiring more Federal bailing out). But.
But, if it's just you we're talking about, you should put your money somewhere you can have much higher confidence in the bank's management for using conservative lending standards and a customer-focused investment strategy. Somewhere like a small, local credit union. Credit unions operate as cooperatives, and the members (i.e. accountholders) own the bank. There are no shareholders other than you all to answer to. Bank policies, like overdraft fees, are not calculated for maximum profit, but for fairness. If there's a lot of money made it goes back to the accountholders. You aren't paying for anyone's estate in the Hamptons or corporate jet; with less highly-paid management, you have far less need for them to take huge, barely-understood risks with barely-legal securities.
If you asked me as a friend, I'd tell you, put your money somewhere you feel safe. And today, I don't feel safe about Washington Mutual.
[Update, September 25, 10:30 p.m.: Tonight's takeover of Washington Mutual by J.P. Morgan may negate this advice; tellingly, $16.7 billion of your deposits were taken out in the past 10 days.]
But, if it's just you we're talking about, you should put your money somewhere you can have much higher confidence in the bank's management for using conservative lending standards and a customer-focused investment strategy. Somewhere like a small, local credit union. Credit unions operate as cooperatives, and the members (i.e. accountholders) own the bank. There are no shareholders other than you all to answer to. Bank policies, like overdraft fees, are not calculated for maximum profit, but for fairness. If there's a lot of money made it goes back to the accountholders. You aren't paying for anyone's estate in the Hamptons or corporate jet; with less highly-paid management, you have far less need for them to take huge, barely-understood risks with barely-legal securities.
If you asked me as a friend, I'd tell you, put your money somewhere you feel safe. And today, I don't feel safe about Washington Mutual.
Reader Comments (Page 1 of 5)
9-23-2008 @ 4:16PM
leigh said...
do not take your deposit from wamu. you are insured up to $100,000. suggest you buy a small amount of their stock. wachovia is looking toward buying them out.
Reply
9-26-2008 @ 2:34PM
SB said...
I came across this as a list of 117 banks that are on an FDIC list of banks that are in distress or likely to fail. Notice JP Morgan Chase and Bank of American both have either bought out other companies or offered to. I don't know how accurate this is but if it is true then JP Morgan Chase is just hedging a bet that this will keep them afloat. If you act as if you are not in trouble then no one will suspect. Is this not what got us to this place to begin with.
Archive For writedowns and distress
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Copyright © 2008 Bank-Implode!
9-27-2008 @ 8:25AM
Jerry Dean Scott said...
You are a few days behind the out house here, aren't you.
9-27-2008 @ 8:23AM
DEE said...
Ah, bad idea, Wachovia is in trouble too.
9-27-2008 @ 12:20PM
Donna said...
also. were int he past.
9-27-2008 @ 12:38PM
laura said...
NOT Wachovia...They are in the process of going under themselves!!!
9-27-2008 @ 12:45PM
Kathy said...
JP Morgan Chase has bought their assets so they will be taking over and you will still have the same card, checks, etc., but eventually it will become a Chase branch. One of our Visas was taken over years ago by Chase, and we have had no problems with them.
9-27-2008 @ 1:43PM
bigallll said...
the only thing wachovia can buy is trouble....thy're next on the buyout, or liquidate, list. Wachovia has more bad paper than tan Wamu and Indy bank put together.
9-27-2008 @ 4:01PM
Laura said...
Anyone still a member of an 'almost failing' bank has to realize charges, ie check fees, atm fees, mim accounts fees... will more than likely go up...so I say .. look out for yourself.. !!!
9-23-2008 @ 5:04PM
Jeremiah said...
You hit the nail right on the head I have thought the same thing.
Reply
9-23-2008 @ 7:32PM
Michelle said...
Hi Sarah,
As a friend, what about Wachovia?
Thanks
Reply
9-24-2008 @ 6:01PM
sarah gilbert said...
Michelle, I think Wachovia will weather this storm o.k. -- they've always been on the conservative side. I used to work there so I know a lot about their general lending strategy.
however, my principle of credit union vs. public mega-bank holds true; in my opinion, you'll always be better off with a small, local credit union where the profits go back to the accountholders.
9-23-2008 @ 9:34PM
Jared Cook said...
What is likely to happen to the existing shareholders of WM? Will this government bailout help or hurt them?
All of these other banks that are interested in taking over WaMu...if someone actually steps in to buy WM, will shares of WM go up?
I am wondering if this is a good stock to buy for $3.50 since I always thought that a takeover usually causes the share price to increase. Am I right to think this way, or am I sorely mistaken? I heard that shareholders of other stocks got wiped out...is that the likely fate of anyone who owns WM stock?
Reply
9-23-2008 @ 11:27PM
Mesh said...
I am keeping my Wamu account for the time being. It is FDIC insured, plus they pay good interest on a savings account that takes no minimum to keep open. I am well aware that the act of me pulling my funds, multiplied by thousands of people, will cost a lot of people at Wamu their jobs and possible cause the bank to fail. If that's what's meant to happen, that's fine, but I'm not going to be the catalyst for that. Plus I like the interest they pay.
Reply
9-24-2008 @ 9:27AM
Mike Smith said...
Your concerns are well-founded. WaMu has moved many of their jobs overseas to India, because they can't afford to pay American workers anymore. Their collections department is about the only thing that's going strong, trying to squeeze money out of broke homeowners (even there, they seem to hire people off the street with no concerns for quality employees). About the only thing they can do is foreclose the house and sit on the property, which certainly doesn't make them any money. It's all downhill from here, and it's your choice whether you wish to go down with the ship or jump off before it hits rock bottom.
Reply
9-24-2008 @ 4:04PM
HUSKERDIVA said...
Get out! Get out while you still can. Like some many other companies, they don't care about you. Save yourself the heartache. Get out now!
Reply
9-24-2008 @ 5:02PM
viola diarmid said...
Knowing nothing about the coming crisis with WaMu, we withdrew our CD 6 weeks ago, because they didn't seem to know how to take care of it. We would get one statement issued with interest posted, then no more for several months, until we had to go in and ask in person to be sent another one. Then one statement, and they "forgot" us again. Finally we decided if we had to keep reminding them, we would find someone else more reliable to take care of our CD. We still have a $50.00 checking acct with WaMu, so we have a "local bank" to cash checks from our out-of-town credit union, our main bank.
Reply
9-27-2008 @ 11:32PM
Dulce said...
Your cd wouldnt have gotten a statement without linking it to your checking account. Cds do not generate statements. But once you set up a combined statement, you would have been getting a statement on your cd every month along with the statement for your checking account.
9-24-2008 @ 6:17PM
neanderthallmall said...
wamu was bought by western bank. they were in at least sandiego. now there wamu. western bank was discourteous; and paid the price. a downtown wamu wouldn't even make change for the parking meter. they dumped all the accounts that weren't making them money; refusing to let them pay atm and statement fees. who they trying to kid.
Reply
9-27-2008 @ 11:32PM
Dulce said...
Fact:
Washington Mutual bought Western Bank. For about seven years Western Bank was operating as Western Bank-a division of Washington Mutual. In 2001, all the Western Banks merged with Washington Mutual.