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In addition to Lehman Brothers, Washington Mutual, the Nation’s largest S&L, is in dire straits. Looking at massive losses, a credit downgrade, and a plunging stock price, the company may need to sell its main asset – the retail branches – to raise cash to survive. The company’s tanking stock price makes raising capital almost impossible, and a last-ditch effort to sell the branches might be it’s only option.
Not that it was hard to see this coming, huge quarterly losses, a phony profit stream based off deferred interest from neg-am loans, and the smallest loan loss reserve of any major bank made them easy targets for a swift and stunning demise.
I imagine it won’t be long before we see the lines out the door at WaMu’s across the country. Not so much of a “Woo hoo!” moment.
From Bloomberg:
Washington Mutual Inc., facing up to $19 billion in bad home loans and slammed by a 34 percent drop in its stock this week, may sell parts of a nationwide 2,300- branch network to raise capital.
“The only real asset they have that’s worth anything to other banks is the deposit base, because of their branches,” said L. William Seidman, chairman of the Federal Deposit Insurance Corp. from 1985 to 1991. Seattle-based WaMu can probably sell branches in New York and Chicago, said Bert Ely, president of Ely & Co. Inc., a bank consulting firm based in Alexandria, Virginia.
Alan Fishman, WaMu’s new chief executive officer, may have to shed branches that hold $143 billion in deposits. The biggest U.S. savings and loan is headed for its fourth straight quarterly loss. Suitors have walked away because of potential damage to their earnings and WaMu’s chief regulator, the Office of Thrift Supervision, has told it to boost risk management and compliance.
Last 3 posts by Morgan
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