1). Sheila Bair rings Jamie Dimon and suggests to him that she might confiscate the assets of Washington Mutual. She says that Jamie should prepare a bid.
2). One week later the Office of Thrift Supervision signs a memorandum of understanding with WaMu saying that WaMu does not need to raise capital or increase liquidity.
3). Sheila Bair forces WaMu to get investment bankers in who will do due diligence.
4). The investment bankers talk down WaMu for weeks in press and cause a minor run.
5). The OTS seizes WaMu without any real indication to the management that this was going to happen and sells it to her hand-picked banker (Jamie Dimon). The deal is irrevocable. In the process she puts the fear-of-government in all the intermediate holders of US Bank finance. This exacerbates the crisis.
6). The WaMu deal causes a panic at Wachovia. There was no panic at Wachovia prior to this – though Wachovia stock is justifiably weak.
7). On Sheila’s timetable a deal has to be done for Wachovia in three days.
8). Sheila decides that no deal can be done without government support and she offers that support. Wells Fargo has simply told her they need more time. Having done due diligence on a small bank I can assure you three days is not enough for a large bank unless the Government is going to give you large warranties. Sheila created a timetable that forced the government into a deal that was potentially bad for taxpayers.
9). A few more days and the deal turns up that doesn’t cost taxpayers anything. Sheila however has staked her reputation on the prior deal and defends her prior behaviour.
I have argued that Sheila should be sacked. I think that is pretty obvious now.
But someone on Wall Street has a better idea. It is in this photo: