Israeli banks are becoming increasingly nervous as financial institutions in the
Mortgage lending practices, which in recent years allowed for loans up to 90 percent for eligible new immigrants, have now been pulled back to a maximum of 70 percent at most institutions, according to a financial advisor who often acts as a mortgage broker in
The source, who requested anonymity, said that many banks have begun to shy away from EMI insurance since the crash of the housing and mortgage market in the U.S. EMI was the giant that guaranteed the larger mortgages for new immigrants who were just starting out in
"There are still banks that will go with EMI," he said, "but they are a lot more cautious now. And most of the larger banks won't touch it. Take a look at Bank Leumi and Bank HaPoalim since Lehman Brothers bank went down. They've both pulled back," he noted.
Despite reassurances from Bank of
Knesset Opposition leader and former Finance Minister Binyamin Netanyahu, chairman of the Likud party, warned the government Thursday, as well, that it must cut taxes as part of the preparation for an economic slowdown.
Largest Bank Failure in
The plummeting housing market in the
Washington Mutual specialized in providing home mortgages, credit cards and other retail lending products and services. By far the largest OTS-regulated institution in the country, WaMu had more than 43,000 employees working in 2,200 branch offices in 15 states as of
OTS appointed the Federal Deposit Insurance Corporation (FDIC) as receiver; the FDIC immediately held a bid and sold the mammoth thrift bank to JP Morgan Chase & Co. This is the second time in a year that JP Morgan Chase has scooped up a major financial institution crippled by a bad gamble in the mortgage market; the bank acquired Bear Stearns Co. last March.
The bank had suffered a loss of $16.7 billion in deposits since September 15, a disaster that followed a 95 percent drop in the price of its stocks from a 52-week high of $36.47 per share to $1.69 at the close of business on Thursday. OTS Director John Reich pointed out that the housing market downturn "had a significant impact on the performance of WaMu's mortgage portfolio and led to three straight quarters of losses totaling $6.1 billion."
On Wednesday, WaMu suffered a ratings downgrade by Standard & Poor's that put it in danger of collapse, leading to the emergency seizure and sale.
Federal regulators hurried to reassure the public that this, the second failure of a major banking institution in less than a month, would not hurt the average American and did not signify a worsening of the precarious financial situation on Wall Street.
FDIC Chairman Sheila C. Bair said, "For all depositors and other customers of Washington Mutual Bank, this is simply a combination of two banks. For bank customers, it will be a seamless transition. There will be no interruption in services and bank customers should expect business as usual come Friday morning."
JP Morgan Chase acquired the assets, assumed the qualified financial contracts and made a payment of $1.9 billion. However, claims by equity, subordinated and senior debt holders were not acquired.
"WaMu's balance sheet and the payment paid by JP Morgan Chase allowed a transaction in which neither the uninsured depositors nor the insurance fund absorbed any losses," Bair said.
Washington Mutual Bank and its subsidiary, Washington Mutual FSB,