JPMorgan's WaMu purchase to go ahead

Citigroup's acquisition of Wachovia hasn't closed yet.

JPMorgan said last week its $US1.9-billion ($A2.3 billion) acquisition of WaMu's stressed loan portfolio could result in a $US31-billion ($A37.45 billion) writedown. The bail out plan tentatively agreed to by Congress over the weekend would have allowed JPMorgan to sell WaMu's troubled mortgage-related assets to the government at a profit.

Confirming that the House defeat of the proposed federal bailout wouldn't affect its purchase of WaMu, JPMorgan spokesman Tom Kelly said: "That train has already left the station."

Joe Heider, president of Dawson Wealth Management in Cleveland, said JPMorgan should be able to shoulder the $US31 billion ($A37.45 billion) in writedowns it plans to take on WaMu's distressed assets without any government assistance, but that this does present a greater risk to the bank.

"They can handle it but it is a higher risk than it was before the vote," Heider said.

Share of JPMorgan fell $US4.97, or 10.3 per cent, to $US43.27 in afternoon trading. The Dow Jones Industrial Average sank more than 735 points - the largest point drop ever - after the House defeated the bail-out plan. President George W Bush and congressional leaders of both parties warned that the economy could nosedive without it.

While the federal rescue package would have prevented most banks from profiting on the sale of troubled assets to the government, an exception was going to be made for assets acquired in a merger or buyout.

This would allow Citigroup sell Wachovia's distressed mortgage-related assets to the government for a profit, assuming its $US2.1 billion ($A2.54 billion) acquisition went through.

The failure of the bailout plan raises questions about just how banks are going to deal with billions upon billions of toxic mortgage debt on their books, and casts doubt on whether Citigroup and JPMorgan will be able to rid themselves of the debt from their respective acquisitions.