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Snooth User: Philip James

Wamu = Epic FAIL

Posted by Philip James, Sep 12, 2008.

Clearly Wamu is in trouble, but maybe its the whole US banking system. I got a few urgent calls from Snooth's accountant today telling me to get our money out of Wamu and over to our Citibank account. Not that Citi's been doing all that well (i believe they lost $8bn recently - much more than Wamu's $3bn loss this quarter). The difference between them is that the government cant afford to let Citi go bankrupt.

Here's a recent article titled: is wamu on the block? http://dailybriefing.blogs.fortune....

It seems a merger with JPMorgan is most likely.

Anyway, so I scuttled off to my local Wamu to move Snooths savings over (its about a decade of my salary, so i was eager to keep it safe). I know that by panicking and pulling our cash I'm adding to the likelihood that Wamu goes down, but my duties (legally and emotionally) are to the shareholders. I do put our users first, and the employees second, but generally that behavior benefits the shareholders. Propping up the US banking system is a risk they'd not signed up for.

It took 2 hours to arrange a simple wire transfer, they were so badly organized I really asked them if they could give me the money in cash (yes, but it would take 11 days!) or in gold bullion (apparently not!). The two banks are adjacent, but wire transfer it was.

There was no one senior around to sign off on my transfer, so at a multiple of the cost I sent several wires, each just under the limit of what the service attendant could sign off on. Total cost was still under $100.

I'm not going into too many details here, as I'd wasted enough time on it already, but I'm certainly never going back to Wamu. Citi is bad too. The interest rates are so low, and snooth is still in cash burn mode, that I may as well leave the money in a safe deposit box, forsaking my meager interest, and at least I'd be safe in the knowledge that my money was actually safe.

Greed and stupidity got us here - but, depressingly, the people who created or traded the financial instruments that caused this mess have made off like bandits and its the people who are slowest to react that are left holding the bag.

As soon as the dust settles I'm doing 2 things:
1) opening an account in either midtown or the financial district, as even though my branches were in manhattan, they didnt really seem to grasp the concept of business banking. Snooth's a pretty small company, and we dont have oodles of cash, so when I write a cheque I'd prefer not to have the cashier wolf whistle at the size of it. At least in midtown we'd be a regular account.

2) look for a bank that doesnt lend money. I'm settle for 0 interest. I'd actually even pay for an account, and this is what brings me to my safety deposit box idea. Snooth doesnt need interest, we need liquidity. And when there's a very real chance that the majority of US financial institutions go down and tie up our money for 6 months as they wrestle with bankruptcy then I know theres a serious issue.

So, if anyone knows a midtown based unconventional bank that does zero to minimal lending then please let me know.


Reply by Philip James, Sep 13, 2008.

OK, just checked this morning, the money safely made it to the safe(?) hands of Citi. Looks like we can keep the lights on at Snooth HQ for a while yet.

Reply by Philip James, Sep 26, 2008.

OK, so our accountant earned his stripes on this call. I moaned about the pain involved in getting Snooth's cash out of Wamu in the above post, but when i read that their accounts had been frozen it all seemed worthwhile:

Very sorry to those who didnt bail in time. Hope that JP will step in and release the funds pronto.

Reply by Adam Levin, Sep 26, 2008.

According to the WSJ, starting the day Lehman went under $16.7 billion in deposits were taken out of WaMu in 10 days.

Reply by Chris Carpita, Sep 26, 2008.

That would have been pretty embarrassing for us if we had to go to Mr. Potter with our tails between our legs because our accounts were frozen. Snooth has excellent financial leadership! I feel sorry for the individuals with WaMu accounts that can't pay their rent. The consequences of the banking crisis are certainly trickling down.

Reply by oceank8, Sep 27, 2008.

Not so much the bank issue but we have two more people moving out this weekend due to their houses going into foreclosure. That makes 8 bank owned, empty house, on my block alone. Getting a bit scary around here.

Reply by Philip James, Sep 27, 2008.

Ocean - yeah, my apartment block is getting a little lonely too. 12 units in the hippest part of Brooklyn (Williamsburg - where yuppies like me are pricing out the real cool 20 year old kids) and at the moment 6 of them are empty. There's a reason why the landlord didnt raise the rent this year...

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