National News

Historic economic intervention becomes law . President Bush signed into law an historic legislative package aimed at supporting financial markets and alleviating credit constrictions. The president, Treasury Secretary Henry Paulson and Federal Reserve Chairman Ben Bernanke strongly advocated such a measure both on Capitol Hill and in stark public comments predicting dire consequences if a large-scale intervention failed to pass. The legislation authorizes Treasury to purchase up to $700 billion in distressed assets and hold them until a favorable time for resale emerges. The Senate approved the measure on Oct. 1. The House authorized the package Oct. 3 after rejecting an earlier version. President Bush signed the legislation that day. .Wall Street icons collapse, seek buyers or government assistance . Some of the largest firms in the U.S. financial services industry took drastic steps to assure survival over the course of a few tumultuous days. On Sept. 16, insurance giant American International Group received an $85 billion loan from the Federal Reserve to stay afloat. Within a week investment banks Goldman Sachs and Morgan Stanley sought bank holding company charters, placing themselves under Fed oversight for the first time. Edmond Seifried, professor of economics and business at Lafayette College, Easton, Pa., declared the era of investment banks over in a presentation to the Iowa Bankers Association on Sept. 22. (See story on page 17.) .WaMu, Ameribank failed in September, pushing yearly total to 13. The Office of Thrift Supervision closed Seattle-based Washington Mutual on Sept. 25. J.P. Morgan Chase acquired WaMu in a transaction facilitated by the FDIC. "This is simply a combination of two banks," said FDIC Chairman Sheila C. Bair. "WaMu's balance sheet and the payment by J.P. Morgan Chase allowed a transaction in which neither the uninsured depositors nor the insurance fund absorbed any losses," Bair said. WaMu was the 13th bank failure of the year. The 12th occurred on Sept. 19, when Ameribank, Inc., of Northfolk, W. Va., was closed by OTS. The FDIC entered into purchase and assumption agreements with Pioneer Community Bank, Inc., Iaeger, W.Va., and The Citizens Savings Bank, Martins Ferry, Ohio, in transactions that were expected to cost the Deposit Insurance Fund $42 million. .Wells Fargo and Wachovia announce merger despite Citigroup deal. San Francisco-based Wells Fargo and Charlotte, N.C.-based Wachovia announced a merger on Oct. 3, days after Citigroup announced it would buy Wachovia. Wells Fargo seeks to acquire all outstanding shares of Wachovia's common stock. The deal may preempt the FDIC-brokered agreement in which New York-based Citigroup would have purchased Wachovia's banking operations leaving the FDIC with some Wachovia assets. Representatives for Citigroup, Wells Fargo, Wachovia and the FDIC are deliberating over which company has the right to proceed with the acquisition.