More banking news: FDIC & merger rumors

Federal bank insurance fund dwindling

Excerpts:

Banks are not the only ones struggling in the growing financial crisis. The fund established to insure their deposits is also feeling the pinch, and the taxpayer may be the lender of last resort.

The Federal Deposit Insurance Corp., whose insurance fund has slipped below the minimum target level set by Congress, could be forced to tap tax dollars through a Treasury Department loan if Washington Mutual Inc., the nation's largest thrift, or another struggling rival fails, economists and industry analysts said Tuesday.

Treasury has already come to the rescue of several corporate victims of the housing and credit crunches. The government took over mortgage finance companies Fannie Mae and Freddie Mac, and helped finance the sale of investment bank Bear Stearns to J.P. Morgan Chase & Co.

Eleven federally insured banks and thrifts have failed this year, including Pasadena, Calif.-based IndyMac Bank, by far the largest shut down by regulators.

Additional failures of large banks or savings and loans companies seem likely, and that could overwhelm the FDIC's insurance fund, said Brian Bethune, U.S. economist at consulting firm Global Insight.

Wachovia merger speculation heats up

Excerpt:

Wachovia, with its dominant Eastern franchise is seen as a promising merger partner for a company with big banking ambitions.

...

Wells Fargo & Co. (NYSE:WFC) has long been viewed as a potential merger partner, given the San Francisco bank’s dominance in the West.

WaMu may seek merger as pressure mounts

Excerpt:

Washington Mutual's stock has lost almost 94 percent of its value from its 52-week high of $39.25 on September 19, 2007, to its close on Tuesday of $2.36, as investors worry about continued losses related to risky real-estate loans.

The company's woes has led to speculation that it is primed for a takeover.

On Wednesday the New York Post reported, citing sources, U.S. federal regulators recently called a number of banks asking if they would consider buying Washington Mutual should it eventually falter.

In recent days federal banking regulators contacted Wells Fargo & Co (NYSE:WFC - News), JPMorgan Chase & Co (NYSE:JPM - News), HSBC (LSE:HSBA.L - News) and several other financial institutions to gauge their interest in a possible acquisition of the largest U.S. savings and loan institution, the paper said.

Comment: A Wells Fargo - Wachovia merger would be a merger of equals (equal in size, not in quality!). Wells / Wachovia would a National franchise à la Bank of America. A Wells Fargo / WaMu deal would be in Wells existing "footprint" - BIG FISH swallowing small fish.