Is Washington Mutual Bankrupt? Why the FDIC is Quaking in Its Boots
Horsemen of the Apocalypse Don Gear as WaMu Rumors Spread
As the Dow Jones is transformed into Mr. Toad's Wild Ride, the fear of a stock market crash is understandable. Washington Mutual stock - along with the Merrill lynch stock price and also the Morgan Stanley stock price - is taking a beating. Forbes quotes the Associated Press report that shows a sharp Washington Mutual stock decline on the latest Wall Street Black Monday.
Smoothing the Waters
The bank was quick to point out that yes, Washington Mutual stock received Standard & Poor's junk rating, but according to the Puget Sound Business Journal, WaMu wants it known that this does not have anything to do with a Washington Mutual bankruptcy, and instead everything with the current overall market conditions.
Well, okay, but this is a bit of a wishy-washy statement. Nonetheless, it served to reinforce investors trust in the floundering savings and loan - or perhaps it has the sharks circling on the look for an easy bite out of the market - and Washington Mutual stock is up a bit.
So, Why Should You Care About Washington Mutual?
First and foremost, WaMu is not your average bank. The New York Times reports that Washington Mutual is actually America's biggest savings and loan. While in April Washington Mutual stock closed at $13.15 per share, in September its shares are trading at $2.39 each. Ouch!
An investment of $5 billion (yes, that's billion with a "b") made the Washington Mutual news and was supposed to ease investor worries a scant five months ago, when it became obvious that WaMu's mortgage side of the business was seriously floundering. It is not reassuring that the Times compared the losses Washington Mutual reported to those seen in the 1990s, at the height of the savings and loan fiasco.
Latest Washington Mutual News Little More than Lipstick on A Pig?
It is clear that the drop of the AIG stock price, the possible Lehman Barclays deal that might help the Chapter 11 bound fiscal institution of much renown, and the skittish Dow Jones do little to allay fears of a stock market crash; when the New York Times posted a follow up article this month that that calls into question the results of the cash infusion into WaMu's business, all bets were off.
This makes me wonder if the protestations to the opposite by WaMu officials are little more than an attempt to smear lipstick on a pig, and although the Treasury bailed out Fannie Mae and Freddie Mac, its failure to act with Lehman Brothers does not bode well for Washington Mutual.
The FDIC is also keeping watch. With WaMu being the biggest savings and loan, a belly up move will put at risk $310 billion (with a "b") in assets, making the deposit insurer liable to step up to the plate.
This begs the question: is the Washington Mutual response to its latest stock rating little more than an attempt to rearrange the deck chairs on the Titanic, or is there really hope? It doesn't look good.
Sources:
http://www.forbes.com/feeds/ap/2008/09/15/ap5424384.html
http://www.bizjournals.com/seattle/stories/2008/09/15/daily12.html
http://www.nytimes.com/2008/04/07/business/07cnd-wamu.html?_r=1&oref=slogin
http://www.nytimes.com/2008/09/11/business/11bank.html
Published by Sylvia Cochran - Featured Contributor in Automotive, Politics, Travel and Lifestyle
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41 Comments
Post a Commentvery sad what is happening
I closed my saving account at Wamu and now I've to hide $430,000. I dont know what to do with so much money in hand.
Failure of world famous banks posses a serious question. How safe your investments are? I think this is time to reorient the investment portfolio one may have.
I drove past a Washington Mutual in Chicago (Wabash, I think) and it was night and the letters WASH were lit up, but the rest of the word ('ington") was dark, so it read WASH MUTUAL. I got out of my car and took a picture of this interesting coincidence.
Sorry my friend. But this isn't a movie. Unfortunately it's real life. And nobody is safe in todays economy and failing housing market. Have to go with the banks that are financially stable and backed by solid investors. Nothing is full proof, of course, but there is more to the WAMU situation then what is being stated.
This is a sad day for all of us shareholders and employees of WaMu... we were robbed blind by the feds and no one said or did anything. Chase, like other firms were circling like vultures, waiting for the feds to move in. They all knew what was going on... this was the plan from beginning on the week of the take over...
The run on the bank was caused by the media and not one agency thought of regulating them or to set the record straight... they let the run on the bank happen right in front of their eyes.
Former CEO Kerry Killinger was so selfish and dumb enough not to sell at $8 per share before turning to TPG and investors for money. He was too concerned about his own legacy and income that he forgot what his job functions were and who he wrote his paychecks. Oh and he was paid over $22 million in separation package.
And now Alan Fishman will get paid over $18 million dollars for three weeks of work? humm... since he failed to do his job as a CEO to secure the company...
Yet another victory for the few. The current economic system is almost deja vue of a similar time in US history. the great depression. During that time many banks failed wall street crashed and the rest is history. The purchase of Wamu for only 1.9 billion by JP Morgan Chase is just ridiculous. Get ready people of the United States you are soon to be the citizens of the American Union and the worthless dollar is finished.Amero here we come. Heck half of Mexico is already in the U.S. Once the U.S. fails along with our constitutional rights the Illegal immigrants will be able to get a American union I.D. and the rest of us will be further out of luck. The bailouts are only a distraction, a chess move if you will. The game we did not know we were playing is close to a checkmate. Sorry people but we are all just pawns that have long been out of play.
I guess the government can do something fast. The FDIC closed down WaMu and it reopened the next day as JP Morgan Chase. The bailouts go on.
Please. . don't think that the rumors out there is gonna eat all ur money away! Wamu is the best bank there is on my opinion 100% customer service satisfaction! I just a student atm . . and i usually have around 400- 600 in my acc. from work, i've been hearing all type of crap from ppl. DO NOT close ur Wamu accounts! its just going to make things worse! PLEASE! there is the FDIC comes to play, if u have less then 100,000.00 you are guarantee protected. . so plase help Wamu out by not closing ur accs.!
UPDATE: http://biz.yahoo.com/rb/080925/business_us_washingtonmutual_jpmorganbiz.html?.v=3