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In what is being termed as the biggest bank collapse in US history, J.P.Morgan Chase & Co. will acquire massive branch network and troubled assets from Washington Mutual Inc. for $1.9 billion, as per a deal arranged by federal regulators. Under the deal – the latest stunning development in the ongoing credit crisis – J P Morgan Chase will acquire all the banking operations of Washington Mutual, including $307 billion in assets and $188 billion in deposits.

Washington Mutual had been one of the most hard-hit banks during the financial crisis after it bet big, like many of its competitors, on the strength of the housing market – only to see its fortunes sour as housing prices fell. Many analysts were speculating that the endgame for the embattled savings and loan was imminent, particularly after ratings agency downgrades this week, and a freefall in the company’s stock.

As a result of the Washington Mutual acquisition, the New York City-based J P Morgan Chase – after its mid-March acquisition of investment bank, Bear Stearns – will now boast some 5,400 branches in 23 states. “We think it is a great thing for our company,” said Jamie Dimon, J P Morgan Chase Chairman and CEO, in a conference call with investors late Thursday night.

Federal regulators who helped in finalizing the deal said the transition for Washington Mutual customers would be “seamless.” In a statement, FDIC Chairman, Sheila Bair, said: “There will be no interruption in services and bank customers should expect business as usual come Friday morning.”

The acquisition might prompt criticism from J P Morgan Chase rivals about preferential treatment by the government. For instance, no government assistance was extended to Bank of America Corp. in its recently announced purchase of Merrill Lynch. However, in the case of Washington Mutual acquisition, there were presumably other bidders who, in comparison to J P Morgan Chase, offered better deal for the deposits and branches.