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Deposit run at WaMu forced their hand, regulators say

September 25, 2008 |  8:25 pm

From Times staff writer E. Scott Reckard:

Just as with IndyMac Bank, the fate of Washington Mutual was sealed by a run on deposits as customers lost faith in the bank, federal regulators said Thursday in seizing the nation’s biggest thrift.

WaMu had continued to assert in recent weeks that it had adequate capital to keep going, despite heavy losses this year on defaulted mortgages.

But the Office of Thrift Supervision said "significant deposit outflows" began on Sept. 15. "During the next eight business days, WaMu deposit outflows totaled $16.7 billion," the OTS said in a statement.

Wamubranch_2 WaMu had total deposits of $188 billion as of June 30.

"With insufficient liquidity to meet its obligations, WaMu was in an unsafe and unsound condition to transact business," the OTS said.

Kar Chin of East Los Angeles said Thursday that he withdrew $20,000 from a WaMu branch in City of Industry late last week even though he knew the money was within federal insurance limits.

He said friends had advised him to take out his money because of the possibility that he might lose access to it temporarily, so he opened an account at Wells Fargo & Co. instead.

Chin said he stood in line for more than a half hour, mostly because of other people making withdrawals, and then heard the teller talking to a supervisor about customers losing faith in WaMu.

Richard Dunne, 56, a 15-year WaMu customer, said Thursday he had withdrawn nearly his entire business account from the Laguna Hills branch the week before on the advice of financial advisors, even though his account did not exceed federal insurance limits.

"Any interruption would cause real problems in my life," said Dunne, who sells women’s accessories.

Maureen, a Laguna Niguel resident who declined to give her last name, said Thursday she withdrew her savings from a WaMu branch in Greenbrae because of a customer there who told her the bank would be taken over.

"I didn’t want to be caught in a time lag," she said, citing a friend whose funds were stuck during the federal takeover of IndyMac in July.

Photo credit: John G. Mabanglo / EPA