Fallout: The Financial Crisis

JP Morgan swallows up another failure

Nancy Marshall-Genzer Sep 26, 2008
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Fallout: The Financial Crisis

JP Morgan swallows up another failure

Nancy Marshall-Genzer Sep 26, 2008
HTML EMBED:
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TEXT OF STORY

KAI RYSSDAL: I’m going to swing by the bank when I get out of here this afternoon. I’m going to slide my card in the ATM. And I’m going to cross my fingers and hope money comes out. Because my bank got a visit from federal regulators late last night. They took control of Washington Mutual, promptly sold its biggest parts to JP Morgan. Yes, deposits are insured. And yes, JP Morgan seems to be reasonably sound. But it is the biggest bank failure in the history of this country. We went to Portland, Oregon, to see how that news — and the whole week — are going over.

Brian Robinson: I don’t have enough funds in Washington Mutual to truly worry about it, but, yeah, it’s not, from a stability standpoint, it’s not a good thing.

Karla Zirbes: I was going to get a little cash, but instead I took out my maximum for today. I don’t know, just in case.

Uriel Olvera: I still, I have my money here, because it is not a huge amount. We have $15,000 on the accounts, which pretty soon we’re going to spend it, because we’re going to open another business, really soon.

Michael Sexton: I was a little surprised this morning, opened the paper. It’s like, “Oh, look at that, my bank was seized.”

We just heard from Brian Robinson, Karla Zirbes, Uriel Olvera and Michael Sexton up in Portland, Oregon, talking to our Mitchell Hartman there.

JP Morgan, you might remember, is the same company that gobbled up Bear Stearns back in March when the financial markets really started coming unhinged. And last night’s developments make it an even bigger fish in a rapidly shrinking pond. Too big to fail ring a bell here, anybody? Marketplace’s Nancy Marshall Genzer reports.


NANCY MARSHALL GENZER: Charlie Scharf heads up JP Morgan Chase’s retail business. He says JP Morgan’s size is an asset.

CHARLIE SCHARF: It’s the convenience, it’s the branding, it’s the ubiquity you have. And it just makes our jobs a whole lot easier. But probably more importantly, it’s much easier for the customers to do business with us.

Easier, but probably more expensive. That’s what Donn Vickrey thinks. He’s co-founder of Gradient Analytics.

DONN VICKREY: As we exit this whole restructuring process with far fewer banks, the consumer may not get quite the competitive rates for services that they would have gotten previously.

But, Vickrey says, consumers might be willing to pay more for convenience. And they may find it easier to get a loan. Carey Leahy of Decision Economics says big banks can help loosen the credit crunch.

CAREY LEAHY: Right now we’re happy with larger institutions that are effectively run and will be more likely to make loans than otherwise, and let’s worry about size a little bit later.

But William Black says size matters — now. Black teaches economics at the University of Missouri.

He says huge banks like JP Morgan that both lend and invest are dangerous. That’s because they could end up lending money to a company they invested in to prop it up.

William Black: They’re going to be so huge in the future that they’ll have a combination of political power, economic power, and they’ll simply be too expensive to allow to fail.

Black says, guess who’ll be called upon to save them? Yep, you, the taxpayer.

In Washington, I’m Nancy Marshall Genzer for Marketplace.

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