Washington Mutual going under:

reading thru some old post I remember the yield trap from the last bear market that sucks in "investors"

 

I agree that WM is too big to fail, and that the TPG overhang will continue to weigh on the stock. Some possible scenarios as to how this plays out:

(1) The powers that be arrange for a BAC / CFC type takeover or takeunder

(2) The powers that be make it illegal to short WM

(3) The powers that be pass FRE / FNM type legislation to keep WM alive "in it's current form"

(4) WM raises more equity and because of the TPG provision, the stock tanks to $1

(5) WM somehow manages to stay above $3

 

July 24 (Bloomberg) -- Washington Mutual Inc. tumbled more than 20 percent for a second day as Gimme Credit LLC said unsecured creditors were ``pulling funds'' from the biggest U.S. savings and loan.

Gimme Credit analyst Kathleen Shanley cited the decline in federal funds purchased and commercial paper to $75 million from $2 billion at year-end, which Washington Mutual reported this week in its second-quarter results. Securities sold under agreements to repurchase dropped to $214 million from $4.1 billion at the end of 2007, she wrote.

Washington Mutual, known as WaMu, reported a $3.3 billion second-quarter loss on July 23. Rising delinquencies forced the Seattle-based company to boost provisions for bad loans. While WaMu said it has enough capital after raising more than $7 billion earlier this year, Shanley said liquidity remains a concern.

``We won't use the phrase `run on the bank,' but we would be remiss if we did not observe that many creditors have quietly been pulling funds,'' wrote Shanley, based in Chicago. Their actions are ``presenting an increasing funding challenge,'' she wrote. Gimme Credit is an independent research firm serving corporate bond investors.

WaMu spokesman Derek Aney didn't respond to calls for comment. Chief Executive Officer Kerry Killinger has said the $7 billion cash infusion led by TPG Inc., coupled with plans to save $1 billion annually by trimming the mortgage business, gives the lender enough money to ride out the U.S. housing slump.

Credit-Default Swaps

Washington Mutual slid 80 cents, or 17 percent, to $3.85 at 1:24 p.m. in New York Stock Exchange composite trading, after dropping as much as 23 percent earlier. The stock fell 20 percent yesterday and has lost 90 percent of its value in the past year.

Some 212 million WaMu shares changed hands, more than five times the average trading for a full day over the past year, according to Bloomberg data. The stock has moved at least 10 percent nine times in the past three weeks.

The cost to protect WaMu's bonds from default rose to a record. Credit-default swaps on the company climbed 100 basis points to 873 basis points, according to Credit Derivatives Research LLC. An increase in the contracts, used to speculate on a company's ability to repay debt or to hedge against losses, signals deterioration in investor confidence.

Credit-default swaps were conceived to protect bondholders against default, and pay the buyer face value in exchange for the underlying securities or the cash equivalent should the company fail to adhere to its debt agreements.

Analysts at Piper Jaffray Cos., Merrill Lynch & Co. and Friedman Billings Ramsey Group Inc. said after WaMu's earnings report that it may need to raise more cash. According to a clause in the TPG agreement, if WaMu raises more than $500 million in equity at less than $8.75 a share within 18 months, it must compensate TPG for the difference.

Standard & Poor's said WaMu has the liquidity to meet obligations without raising more funds through 2012. Analysts at Lehman Brothers Holdings Inc. and UBS AG also said the company should have enough capital.

http://www.bloomberg.com/apps/news?pid=20601110&sid=a3479q5QfJhw

 

Mortgage concerns batter Washington Mutual shares

Thursday July 24, 3:26 pm ET

Washington Mutual shares continue descent as concerns over mortgage portfolio persist

NEW YORK (AP) -- Shares of Washington Mutual Inc. fell sharply again Thursday, as concerns persisted about the company's mortgage portfolio following its report of a $3 billion quarterly loss earlier this week.

Shares dropped 90 cents, or 19.4 percent, to $3.75 in afternoon trading. Shares are down about 72 percent for the year.

Late Tuesday, the nation's largest thrift posted a $3 billion loss due to increases in its loss reserves to cover souring loans in its mortgage portfolio. The stock fell 20 percent Wednesday.

"We are concerned that credit and market conditions will continue to damage Washington Mutual's financial flexibility over the near to intermediate term," wrote Citi Investment Research analyst Bradley Ball in a note to clients Wednesday. "In particular, we think a credit rating agency downgrade of Washington Mutual's debt to junk levels, as threatened by Moody's, would likely raise the cost of doing business and further dampen performance during the currently challenging environment."

http://biz.yahoo.com/ap/080724/washington_mutual_mover.html?.v=1

 

"National City has cash and other short-term, liquid assets totaling about 17% of its $98 billion deposits, and WaMu has liquid assets totaling roughly 21% of its total deposits in cash and short-term assets. A run on deposits would crush either one of them. "

if somebody see a branch of WM with lines or people pulling funds, please report, that will be a gold opportunity to make free money

 

conference call WM rips because they say they do not have a liquidity problem... i went long at the high, very upsetting i should turn off the tv when i'm trading.

 

the numbers dont lie
http://www.marketwatch.com/news/sto...x?guid={5EA5F544-6F59-418A-8A8F-73FE17C90BED}

"However, in the company's earnings report released earlier this week, it said that total deposits fell by $6.13 billion during the second quarter.
According to that same data released by the company, commercial business and other deposits fell by $1.51 billion in the quarter, while institutional brokered deposits fell by $1.61 billion and custodial and escrow deposits shrank by $1.11 billion. "

The company says they have $40b in liquidity, they also have $180b in deposits.
If without rumors they lose $6b in deposits if the rumors start to spread they wont be able to take it. the fed window demands high quality collateral, if the collateral is being sold(the liquid stuff) to meet depositors there is no fed window for them

 

I thought about dipping my toes in @ 3.70 but the risk of an Indy-Mac style run are too great at this point, IMO.

Thought? Contrary opinions?

 

......stop press......RUN ON THE BANK TAKING PLACE....FDIC under cover staff have visited WaMu today.....this weekend WaMu is in FDIC hands......WaMU will open again Monday under FDIC management.....stop press.

http://www.forbes.com/markets/equit...report-market-equity-cx_md_0724markets41.html

Gimme Credit To Wamu: Gimme A Break
Maurna Desmond, 07.24.08, 6:05 PM ET

Washington Mutual
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Gimme Credit, a bond-research organization, is sticking by its story: Washington Mutual is in trouble.

While several analysts published notes expressing concerns about the firm, the bank’s reputation took a real shot when Kathleen Shanley of Gimme Credit wrote: “We won’t use the phrase “run” on the bank, but we would be remiss if we did not observe that many creditors have quietly been pulling funds.”

Rattled by Shaney's report, Wamu's shares lost 13.8%, or 64 cents, to $4.01, Thursday. The bank denied the implications of Shanley's report and said it obtained most of its short-term financing from its own deposit base, but the researcher told Forbes.com she was standing by her analysis.

Shanley said that other banks have reduced their lending to Washington Mutual (nyse: WM - news - people ). The firm's monthly intra-bank borrowing declined to $75.0 million at in June, down from $2.0 billion at the end of 2007 and down 71.7% from $3.4 billion a year ago.

Further evidence: Washington Mutual’s subordinated notes due in 2014 are currently yielding 15.0% at a time when five-year Treasury bonds return just 3.3%. That large differential indicates lenders are hestitant to give the bank their money.

 

nobody cares about your posting. no need to be a yahoo finance amateur and block out certain letters.