WaMu is now Junk - Update, Up on the Auction Block

This is updating news on a previous post. The waves just keep on coming like a tsunami. The fall out is happening so fast and furious it's difficult to keep up.

WaMu for Sale via Auction:

Washington Mutual, the nation's largest thrift, has put itself up for sale, the New York Times reported on Wednesday, citing unidentified people briefed on the matter.

This actually was started a few days ago, via Goldman Sachs.

Now an auction implies ...what someone can get it for nothing or ? Details unclear but clearly the next wave in the storm.

Bonddad has more details:

Goldman Sachs, which Washington Mutual has hired, started the process several days ago, these people said. Among the potential bidders that Goldman has talked to are Wells Fargo, JPMorgan Chase and HSBC. But no buyers may materialize. That could force the government to place Washington Mutual into conservatorship, like IndyMac, or find a bridge-bank solution, which was extended to thrifts in the new housing regulations.

Citigroup is also considering an offer, but would likely be able to buy Washington Mutual only if it emerged from a receivership, according to a person close to the situation. JPMorgan is maintaining its posture that it will not bid unless it receives government support, according to another person briefed on the matter

Below is the previous post on WaMu.

WaMu Cut to Junk

Washington Mutual Inc was downgraded to below investment-grade status by Moody's Investors Service, after the largest U.S. savings and loan projected a $4.5 billion third-quarter increase in reserves for bad loans but said it has more than enough capital

Two notches to Ba2.

Look at these facts on ARM options

About 83 percent of the option ARMs issued from 2004 to 2007 were underwritten without full documentation of borrowers' incomes, Fitch said.

``For most borrowers, once their loan resets, there's no place for them to go,'' said Hilts of Fitch. ``A high percentage of them don't have equity, so they can't refinance, and they don't have the income to withstand the payment shock.

Four percent of Washington Mutual's option ARM portfolio probably will reset in the second half of this year and 13 percent, or $7.1 billion, will reset in 2009, according to the SEC filing

The article is about why WaMu is in such trouble. This is just completely irresponsible.

We need an ultimate blog post, a road map analyzing who specifically changed all of these rules, deposit requirements and mortgage requirements to cause this disaster.

What I find amazing is how all of these facts are coming out now. They should have been reported when they were happening.

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Everything is happening too fast

The Fed changed their asset swap rules, but do they have any treasuries left to swap? There are rumors that the Fed is now buying equities.
And then you have the implosion at AIG. It takes a lot of time just to keep up with all this.


I just a news flash that said "AIG is inverted". I have no idea what that means specifically. Something seemingly is imploding on AIG, but why and how and what, it's too confusing.

more news on AIG

I got this for the RGE newsletter:

  • AIG has been given special permission to access $20 billion of capital in its subsidiaries to free up liquidity by the state of NY
  • AIG rejects private equity injection but seeks $40bn bridge loan from Fed as it faces a potential downgrade from credit ratings agencies that could spell its doom

AIG - bankruptcy

CNBC is reporting the word is AIG will declare bankruptcy tomorrow. There is a question if they will get a bail out now but overnight their $40B need went up to $70B or so.

It's astounding, not clear if they will but the talk is sure sounding identical to Lehman over the weekend. Hunting the globe looking for cash and doors are shutting.

Here comes Chase on WaMu

Private Equity waives dilution clause:

Washington Mutual Inc. and private- equity firm TPG Inc. agreed to waive a clause that would have forced the savings and loan to pay TPG for any dilution it suffered from a future capital infusion or buyout

That was an earlier save by TPG which blocked WaMu from bailing out in a fire sale.

I'll bet Chase (J.P. Morgan) takes over WaMu before the week is out. WaMu has some of the biggest exposure to subprime of the major banks.