Still paying for the sins of WaMu

September 10, 2009 | By Jim Kim

Fortune takes a look back at the implosion of Washington Mutual, calling it the "largest-ever U.S. bank failure." Recall that WaMu basically ran out of dough after business customers withdrew their uninsured deposits at a scary rate. There was real fear that the dominoes would fall once Lehman fell. Regulators seized the nation's sixth-biggest bank and sold it to JPMorgan Chase.

"The move wiped out WaMu's 56,000 shareholders of record and left bondholders nursing billions of dollars in losses. But the WaMu deal spared the federal deposit insurance fund and thus was, unlike so many federal actions over." But there are still a lot of people struggling with Option ARMs and other similar mortgages. JPMorgan took $31 billion in writedowns when it acquired the thrift. It may yet take more, especially if the recession drags on.

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