Washington Mutual was the largest bank failure in U.S. history when it occurred during the 2008 stock-market crash.
The Office of Thrift Supervision closed Washington Mutual Bank on September 25, 2008, after a severe loss of depositor confidence. JPMorgan Chase acquired the bank’s deposits and most of its assets from the Federal Deposit Insurance Corporation for $1.9 billion.
Washington Mutual had grown into a major savings and loan institution, but it was heavily exposed to residential mortgages and home-equity lending. As US housing prices fell and loan defaults increased, customers withdrew funds and investors lost confidence.
The failure is often confused with Lehman Brothers’ bankruptcy, which happened eleven days earlier. Lehman was a large investment bank; Washington Mutual was a federally insured thrift bank. Their failures demonstrated different channels through which the housing crisis spread through finance.