Big enough to fail

Like a well-timed lightning flash and a clap of thunder, Washington Mutual was felled late last night as politicians withdrew their shaking hands and started pointing to alternatives. The failure - by far the biggest - looked like another steal of a deal for JPMorgan Chase, which picked up branches and assets from what had been the biggest savings and loan for $1.9 billion. So the once-mighty west-coast lender, which had a market cap of $3.9 billion just yesterday, joins Bear Stearns in JP Morgan CEO Jamie Dimon’s stable of failed finanial firms.

Now the market can get back to the business of trying to figure out who goes next, and politicians can get back to protecting their (constituents’) interests. Attention may head overseas next, where fear that Washington’s problems getting the bailout going will pound their own banks. Rumors that HSBC might take out UBS have been around for a while, but were seen pushing prices around this week. Dutch-Belgian bank Fortis’ shares plunged 14 percent as its president insisted it had “no liquidity issue.”

Wamu was a particularly big target. The largest U.S. savings and loan has been one of the lenders hardest hit by the nation’s housing bust and credit crisis, and had already suffered from soaring mortgage losses. Here’s how much bigger - Washington Mutual has about $307 billion of assets and $188 billion of deposits. The largest previous U.S. banking failure was Continental Illinois National Bank & Trust, which had $40 billion of assets when it collapsed in 1984.

Deals of the day:

* Macquarie Group , Australia’s top investment bank, plans to sell its margin lending business due to increased costs of funding and to focus on its core businesses.

* Malaysia’s central bank told state-owned Maybank to cut the price of its $2.7 billion bid for Bank Internasional Indonesia in a latest twist that could kill the troubled deal.

* Russian tycoon Suleiman Kerimov’s Nafta Moskva has offered to acquire fellow billionaire Vladimir Potanin’s 35 percent stake in Polyus Gold for $1.6 billion, Vedomosti business daily said.

* German airline Lufthansa has expressed interest in taking a stake in Alitalia , a union leader said.

* Top Nordic telecom operator TeliaSonera aims to tap growth in Asian markets by buying controlling stakes in operators in Nepal and Cambodia for around 3.2 billion Swedish crowns ($488 million), it said.

* Tata Motors , India’s top vehicle maker, is in talks with private equity funds to sell up to 25 percent each in six unlisted units, the Economic Times said, citing bankers close to the development.

* Machinery maker Avery India said its parent company had agreed to sell the 58.28 percent stake in the firm to ITW Global Investments, resulting in change in control.