Washington Mutual (WM), a major holding in several financial exchange traded funds (ETFs), has just joined the casualty list.

JP Morgan Chase (JPM) is buying the bank’s assets for $1.9 billion after the FDIC seized the bank, reports Madlen Read for the Associated Press. WaMu is the largest bank to fail in the country’s history. Its $307 billion in assets eclipses that of the second-largest bank to fail, Continental Illinois National Bank, which had $40 billion in assets when it went under in 1984. IndyMac had $32 billion when it was seized by the government in July.

Since the assets have been sold to JP Morgan, it prevents the bank’s collapse from draining the FDIC insurance fund.

Wachovia (WB) and National City Corp (NCC) shares fell on the worries, as well.

Bailout talks have hit a snag, as there are disagreements over some aspects of the rescue plan, report Julie Hirschfeld Davis and Charles Babington for the Associated Press. President Bush issued a statement saying that while lawmakers can express their doubts, they must work to prevent an economic meltdown.

The U.S. economy grew less strongly than believed during the second quarter, as consumers spent less and businesses trimmed investments, says Glenn Somerville for Reuters. Gross Domestic Product (GDP), which is the measure of total goods and services output within the United States, expanded 2.8% from April to June instead of the estimated 3.3%.

ETFs hit today include:

• KBW Regional Banking (KRE): up 1% year-to-date
• Vanguard Financials (VFH): down 22.4% year-to-date
• iShares Dow Jones U.S. Financial Services (IYG): down 24.3% year-to-date; Wachovia is 7.1%
• Regional Bank HOLDRs (RKH): down 14.2% year-to-date; Wachovia is 10.1%

Tags: Financial, IYG, KRE, RKH, VFH

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