WaMu (& BKUNA, & DSL) on the brink?
September 8, 2008 – 11:13 amAs reported at length by Mr. Mortgage, and more recently, on this blog: WaMu is in deep trouble. CEO Kerry Kilinger was fired this weekend and today the bank signed a “memorandum of understanding” with its chief regulator, the Office of Thrift Supervision.
Basically, OTS just put WaMu on notice.
Remember, WaMu has about $120 billion worth of toxic mortgage assets sitting on its balance sheet. Subprime, Option ARMs, Home Equity Loans, etc. Taken together, these securities are likely worth 50 cents on the dollar. It’s not easy deciphering their balance sheet, but WaMu probably has in the neighborhood of $40 billion of capital backstopping these losses. So if they actually write down their assets to reflect their current value, it could wipe them out.
Is it any wonder WaMu is desperate for capital?
With $140 billion in insured deposits, any prospect that WaMu might fail has to be stressing regulators, especially the FDIC. Remember, FDIC has only $45 billion in its reserve fund, meaning that a failure the size of WaMu could come close to wiping THEM out.
After Fannie and Freddie, the march of the bailouts will surely continue…
[P.S. OTS also downgraded the "regulatory capital status" of FL's BankUnited late last week. That's the bank that gave this blog its name. Totally reliant on Option ARM loans, their loan book is in terrible shape. And they've been unable to raise new capital to repair their balance sheet. OptionARMageddon is nearly upon them.]
[P.P.S.: OTS also issued a "cease and desist" order to Downey Savings and Loan of California, another lender that relied heavily on Option ARM loans....]
Posted in bailout, banking, taxpayer issues |
17 Responses to “WaMu (& BKUNA, & DSL) on the brink?”
WaMu will be purchased by JPM at 6 no a rumor
By Bob in Houston on Sep 8, 2008
The election choice is difficult but would McCain, who is talking about more tax cuts, be any better. In addition, there is the problem of our addiction to oil. Does it make sense to continue to give tax breaks to the oil extraction industry even as prices are at a record high while killing breaks for renewable energy? Also, coal is on a roll even as we know the problems with that and global warming. As a citizen I feel like we are bouncing around in a kettle of boiling water with no direction as the lid threatens to blow off.
Oh, and don’t forget the car companies on the line waiting at the door of Congress for help.
By CB on Sep 8, 2008
This is a business blog not a political blog
By Ricky Roma on Sep 8, 2008
All business is politics d-bag
By Dave Moss on Sep 8, 2008
No need to use pejoratives, Dave Moss. We’re just having a conversation, not insulting your grandmother.
By SoCalGal on Sep 8, 2008
I really relish that bankruptcy. That will remove all the bullshit around the “savior” Paulson and his stupid bailout plan of Fannie and Freddie. Bust it ! Kill it ! Slice the head of WaMu. That way it would shake all the con men trying to do on the investors a little operation “Pump and dump.” If you have money at WaMu get it out now ! Get it out and ALL of it !
By Marc Authier on Sep 8, 2008
Honey ! I monetized the kids !
By Marc Authier on Sep 9, 2008
A lot of banks are hovering on the edge of insolvency (if you believe their balance sheets. I don’t, they’re actually bankrupt).
Anyway, the destruction of all of F&F’s subordinated instruments (common, preferred, various levels of bonds, etc.), will push a lot of them OVER the edge. I don’t know how much of this junk WAMU has, but that may be the camel that broke the straw’s back.
By Douglas Tuttle on Sep 9, 2008
I’m wondering what could have been done instead of this. Clearly, it was a ploy to keep foreign investment still interested in the US.
Look, we borrow over 2.3 billion a day to keep the US govt running. A lot of that comes from Asia. In 2004, right after the US presidential election, the dollar dropped 10% in 11 days. It was front page news on all the foreign papers–with Kozumi screaming that the Japanese would not put up with this.
It’s just a matter of time before foreigners see the light and realize the US is a lost cause for a while. They’ll cut us loose and we’ll fall.
It’s gonna hurt. Real bad.
By Lisa on Sep 9, 2008
To “Bob”, the first poster:
Why would JPM even consider such a thing, especially after the rough digestion of Bear? *Anyone* buying WM right now - at any price - would be slicing off one of their limbs.
BofA is sweating about the remaining resets in Countrywide’s books. Of course, we all know that mergers at such levels - in such times - are shotgun weddings overseen by the govt. But making JPM take over WM’s toxicities makes no sense in any context.
By Danny on Sep 10, 2008
On my way home today, I noticed about 20 people outside the local WaMu branch. they were probably trying to get their money out…
By John on Sep 10, 2008
All business is politics- and that is the problem. Regulation, taxes and mandatory practices have destroyed our ability to create & compete in business. I chuckle when supporters of taxes on the rich and business think that is a solution. If you EVER owned a business and had your taxes increased, you simply pass the cost to the consumer. In other words, a tax on companies is nothing but an additional tax on YOU, the consumer. How can you be so easily fooled by this old, old, old strategy? Tax the rich and you destroy the ability for wealth creation. Don’t think so? Well, who buys 1,000’s of shares of stock, corporate & municipal bonds and other investment paper to finance companies, cities, States and even the Federal government? Where does money come from for lending to the public and for commercial enterprises? As for Asia buying our debt- they are only keeping us alive financially because we are their biggest consumer. The Pan-Asian community has nearly 2 billion people. When they reach the point of becoming their own consumers they will no longer need our consuming market and will cease buying our debt. The only other purchaser of our debt is OPEC. They do it because we buy their oil at whatever prices they want. Without Asia & OPEC buying our debt we are bankrupt and have no working capital at the Federal level. No one else is buying our debt- not Europe, Africa ,South America, Mexico or Canada. Please don’t forget that all the risky mortgage instruments were approved by Congress and the Senate. You don’t just make up a new investment and start selling it. Government saw benefits of revenue and political power when approving these instruments. Bank failures are inevitable now. When FDIC runs out of money the U.S. Treasury will start to support the system. Failure to do so will cause a depression worse than anything we saw in 1929. Without a mortgage market system and banking system all investment, growth and development in this country will cease. Even a novice to economics, business and finance can understand that. There is a solution to all this if you read the Fair Tax book. However, it will take true leadership to get anything done and remove the Socialism that has eroded our system since the New Deal.
By Mike on Sep 11, 2008
If banks and for that matter all financial institutions including auto manufactures are getting in line for welfare assistance wish thay may get? why is it that the regular tax payer the one who is loosing his home cannot get any releif from the same bank who asking the U.S government for assistance? Is this correct or am i so dumb that i cannot understand that in this country only big business can get wellfare.
By Ruben on Sep 11, 2008
It is time for all U.S. Citizens from all walks of life to stop making their Home, Auto and Credit card payments and continue after a genius in ecomomics can bring jobs to the entire country and put the entrire country to work. I think that is time for American companies to start producing in our land not in sweat shops outside of our country, Americans should also stop buying anything that is not made in te U.S.A. The Goverment U.S. Goverment Should 1. tally the entire debt incurred by banks (good and bad) U.s. Goverment to gurantee 1/2 of the debt and the banks to accept a 50% loss on top of that a credit amesty for all Americans everyone to start from scratch on their creddit fico, banks will start lending according to the capacity of each client, thfe economy will be up and running in no time. hard decisions for tought problems.
By Ruben on Sep 11, 2008
This is why we should be living under socialism!!!
By V.I. on Sep 12, 2008
rubin,
you want to have to buy 200 dollar sneakers? you want an outfit for your school kid to cost 100 bucks at walmart? how about a 4000 dollar computer for you to blog on? Dude, don’t you understand globalism means having alot of low wage servants making your life richer?
for sure we should create more jobs of meaningful work for Americans. Agriculture, feeding the world is our job, Medicine, education, technolgy, innovation……and the next investment bubble that will turn around this economy— green energy tech
By bill hopen on Sep 14, 2008