Washington Mutual's Bank Failure

Good Essays
Running head: WASHINGTON MUTUAL'S BANK FAILURE

Washington Mutual's Bank Failure
Rodney Hightower
University of Phoenix

Washington Mutual's Bank Failure
Having spent the early part of my professional working career as a Vice-President with Western Savings & Loan enabled me to experience firsthand the recent collapse of Washington Mutual through different lenses.
(According to Dr. Housing), the story begins in the 1920s. Back then, houses typically cost $5,000. Sure doesn’t sound like much until you consider that the average annual income in the US was $1434 in 1925 consequently, few people could afford to pay cash for their homes, just like today. So, people borrowed the money from banks again, just like today. But the loans were structured differently back then. A common clause in the loan agreement gave banks the right to demand full payment of the loan at any time, if you failed to repay your when asked, the bank had the right to take your house from you and sell it to get its money back.
So although the terms called for you to send in a payment every month to pay off the balance over 30 years you knew you suddenly might be required to repay the remaining balance in full at any given time. However, you just didn’t worry about that clause simply because they knew if the bank asks for the balance in full they might as well ask for the moon.
When the stock market crashed, millions of investors lost he sums of money. Problem was it wasn’t their money to lose that they had lost. Back then most investors bought stocks with borrowed money, money lent to them by stockbrokers called, “a margin account.” Under the rules back then a investor could buy $4100 worth of stock for just $10, the broker would loan you the other $90. When the crash (1929) hit knocking 30% off the value of everyone’s stock portfolio the account was worth only $70. But the investor borrowed $90 to buy them. This led to a, “margin call,” when the broker would tell the investor they had

You May Also Find These Documents Helpful

  • Good Essays

    compani Freddie M and Fann Mae were placed into c ed l ies Mac nie conservatorsh by hip the U.S. governme a move de ent, esigned to sta abilize the em mbattled lenders. On Mond day, Septemb 15, ber global investment bank Lehma Brothers filed for Cha an apter 11 bank kruptcy protection. Broa US ad equity market inde y exes dropped by as much as 5 percent as rumors s d h t spread about potential liqu uidity crises at other majo financial in or nstitutions. A slight marke recovery…

    • 5997 Words
    • 24 Pages
    Good Essays
  • Powerful Essays

    Washington Mutual Failure

    • 3656 Words
    • 15 Pages

    Intra/Entrepreneurship and Business Management Business Failure Case Study Washington Mutual Failure Failing in business isn 't fatal. It 's often a precursor to success. It 's not uncommon for successful entrepreneurs to fail before achieving success. During turbulent economic times, such as now, we can easily find ourselves shifting the blame for the failure of our businesses to factors outside of our control. Similarly in economic boom times we can find ourselves being quite proud…

    • 3656 Words
    • 15 Pages
    Powerful Essays
  • Powerful Essays

    Causes of Bank Failure

    • 6376 Words
    • 26 Pages

    WHY BANK FAILS Introduction Banks are the safest place to keep your cash. Nevertheless, bank failures happen from time to time. Here 's a look at what causes bank failures and what you can do about them. The main thing to know in a bank failure is that your money is probably safe. If your money is FDIC insured, you probably don’t need to panic. Bank Officers’ Fraud Let us have an example from USA Former TBW CEO Pleads Guilty in $1.5 Billion Bank Fraud Scheme WASHINGTON—Paul Allen, the…

    • 6376 Words
    • 26 Pages
    Powerful Essays
  • Satisfactory Essays

    Us Bank of Washington

    • 573 Words
    • 3 Pages

    * Most elderly women are living lonely; where as in elderly men, half of them are married. * When they become older, they have few friends because of certain things such as vision, hearing problems; thus, they need more family care. * Activity theory of aging: looking at construct of social roles, some have lost spouse roles. * Social roles drop out when aging. * When these older people engaging in different activities, they maintain in healthy ways and they are happier. *…

    • 573 Words
    • 3 Pages
    Satisfactory Essays
  • Powerful Essays

    The Cause of bank failure

    • 970 Words
    • 3 Pages

    two or more banks (the syndicate) contract with a borrower to provide (usually medium term) credit on common grounds governed by a common document. One member of the group is normally appointed to act as the managing or lead bank for the syndicate and it is the role of this bank to coordinate all negotiations, payments and administration between parties once the contract has been executed.it is a multi - bank transaction with each bank acting on a several basis, which means that each bank acts on its…

    • 970 Words
    • 3 Pages
    Powerful Essays
  • Satisfactory Essays

    Causes of bank failure

    • 343 Words
    • 2 Pages

    Sameer Africa Ltd Ord 5.00 Marshalls (E.A.) Ltd Ord 5.00 BANKING Barclays Bank Ltd Ord 0.50 CFC Stanbic Holdings Ltd ord.5.00 I&M Holdings Ltd Ord 1.00 Diamond Trust Bank Kenya Ltd Ord 4.00 Housing Finance Co Ltd Ord 5.00 Kenya Commercial Bank Ltd Ord 1.00 National Bank of Kenya Ltd Ord 5.00 NIC Bank Ltd 0rd 5.00 Standard Chartered Bank Ltd Ord 5.00 Equity Bank Ltd Ord 0.50 The Co-operative Bank of Kenya Ltd Ord 1.00 INSURANCE Jubilee Holdings Ltd Ord 5.00 Pan Africa…

    • 343 Words
    • 2 Pages
    Satisfactory Essays
  • Best Essays

    Business School Continental Illinois Bank Failure The failure of Continental Illinois National Bank and Trust Company (CINB) One of the most famous features on the landscape of the banking crisis in 1980s was the crisis involving the Continental Illinois National Bank and Trust Company in May 1984, which still is one of the largest bank failures in U.S. banking history. The collapse of CINB was a significant event in banking history that had a moral for both bank risk managers and regulators. It…

    • 2349 Words
    • 10 Pages
    Best Essays
  • Good Essays

    U.S. Bank of Washington Problem The loan approval board has currently reviewed the loan application of the Redhook Ale Brewery in connection to the proposed issuance of an expansion loan for the amount of $6.5 million dollars. Redhook Ale has been a valued customer with no complaints but yet there are still some areas of concern in regards to this proposed application. U.S. Bank could possibly face losses on their investment in the end causing more liability. Currently the profit indices for…

    • 849 Words
    • 4 Pages
    Good Essays
  • Powerful Essays

    Background 1. 1. History Nepal Development Bank Limited (NDBL) was established under the Company Act, 2053(1997) in Chaitra 6, 2054 (March 19, 1998). It was the first national level development bank established by the private sector in Nepal. It had commenced its operation since Magh 17, 2055(January 31, 1999) as per Development Bank Act, 2052 (1996). Since Baisakh 21, 2063(May 4, 2006), it had imparted its services in accordance with Bank and Financial Institution Act, 2063. It had entered…

    • 2164 Words
    • 9 Pages
    Powerful Essays
  • Good Essays

    Washington

    • 638 Words
    • 3 Pages

    Period 4 11/4/12 George Washington was the first president of the United States and was a great leader for America. He got rid of the monarchy and led the colonists to freedom. Due to his accomplishments, Americans admired and looked up to George Washington. They felt if he led us through the war that it would be best if he could lead us as a President. President Washington was very successful in his two terms in presidency. George Washington ended the Whiskey Rebellion by leading the army himself…

    • 638 Words
    • 3 Pages
    Good Essays