Washington Mutual has finally failed......its about time. I'm not sure how it lasted this long. For those of you with bank deposits at WaMu you have nothing to fear. While the bank was taken over by the FDIC it was sold to JP Morgan, which proves that those banks who have sound lending practices will find themselves with big opportunities during difficult times. JP Morgan bought Bear Stearns earlier this year. It seems that the House of Morgan is continuing its reputation as an entity of respite in tough financial times.
The funny thing is that this isn't really news, its almost an afterthought. The real focus is on the so-called "bailout" package in Washington. This bailout package could easily turn into a pork barrel bailout - where dissenting politicians are bribed with all sorts of ridiculous things the American people don't need in order to be induced to vote for the bailout.....which I do think is needed. I hope I am wrong, but congress has made us all cynical.
As for the bailout, I have not as of yet commented either way. Its strange for me not to have an opinion on something like this, but its also been hard to really wrap my arms around. For months I've been saying that we need real leadership to get through this financial crisis....no one stepped up, until a little over a week ago. The more I read about the plan, the more comfortable I am about it and the more skeptical congress is of the plan, the more I think it might work. Congress tends to be for things that turn out bad (can someone say Fannie and Freddie) and against things that work - so, using my contrarian congressional indicator.....this package might work.
I'll try to link to an opinion piece in the Wall Street Journal that claims this $700 billion bailout could in fact be the most profitable trade in the history of the world, potentially adding $2.2 trillion to the Treasury in a best case scenario, a true windfall. However, I'm not counting on that to happen - I just want us to get our $700 billion back plus costs and interest (and get the financial industry working again) and then I'd be happy.
Is this bailout perfect? No. Is it ridiculous that we have to do this? Yes. Do we have a choice? Of course, but I think the decision to do nothing in this case is a choice that will hurt far more people than if we act.
I'll keep you updated.
Scott Dauenhauer CFP, MSFP, AIF