WaMu (Washington Mutual) Rating Lowered to Junk by S&P on Mortgage Losses

[Pale Blue Dot]

Source: Bloomberg

Sept. 15 (Bloomberg) -- Washington Mutual Inc., the biggest U.S. savings and loan, had its credit rating cut to junk by Standard & Poor's because of the deteriorating housing market.

S&P reduced its rating on Seattle-based WaMu to BB- from BBB-, leaving it three levels below investment grade, the ratings firm said today in a statement.

``Increasing market turmoil and the related impact from managing its concentrated mortgage franchise in this troubled housing and credit cycle led to the downgrade,'' S&P wrote. S&P cut its rating on the subsidiary bank to BBB- from BBB.

S&P followed similar announcements last week from Moody's Investors Service and Fitch Ratings. WaMu, which has reported $6.3 billion of losses in the last three quarters because of soured mortgages, said on Sept. 11 that it expects a third- quarter loan loss provision of $4.5 billion.

WaMu tumbled 73 cents, or 27 percent, to $2 at 4 p.m. on the New York Stock Exchange. The shares dropped another 20 cents, or 10 percent, to $1.80 in extended trading. They've lost 94 percent of their value in the past year.



Read more: http://www.bloomberg.com/apps/news?pid=20601087&sid=awDjhtIfoz_Q

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If you have more than $100,000 total in Washington Mutual, get the excess out NOW.

Many analysts feel that a Washington Mutual failure would use up the FDIC's remaining reserves. What happens then is anyone's guess.

[nadinbrzezinski]

1. Oh lord....

this is getting surreal

[Cheney Killed Bambi]

2. S&P says not to panic

It says, as quoted in that same article:

``On a more positive note, we recognize that WaMu's holding company liquidity position is currently solidly positioned to meet all of its fixed obligations through 2010,'' S&P said. ``The bank is operating with adequate capital positions from a regulatory perspective and has demonstrated funding resilience as the deposit franchise has remained stable.''

WAMU is not going to go belly up because it's an actual bank. It's different from Bear and Lehman.

[Pale Blue Dot]

4. Frankly, I'm tired of being told not to panic.

For the past couple of years, EVERY TIME we've been told not to panic it turns out that we really should have panicked.

[alcibiades_mystery]

19. Sit tight in your office

The explosion was at the North Tower. The South Tower is not affected by this incident...

[BootinUp]

7. If people follow the advice

in the OP that could change.

[superconnected]

13. The big financial institutions will follow the advice in the OP while telling

the little people not to. That's how all the stock plunges happen - regardless of the corruption/not-corruption that trigger them.

At the institution level a 3% loss is enough to trigger most to pullout their bets while they tell the average investor to sit tight.

And btw, this mammoth stock plunge is the institution level showing that they're getting out.

[sentelle]

9. Not Like Bear Stearns

More like IndyMac

WooHoo.

I'm a little worried because of all of the WAMolians that live where I do, and work at the mothership in Seattle. I wonder what its going to do to them, and if too many of them put their houses on the market, It will drive down the price on my own.

[lurky]

3. WaMu has $143 billion in insured deposits.

FDIC has $50 billion in reserves. You don't need to be a hedge fund quant to see the problem here.

[high density]

6. You can't assume 100% of the deposits are at risk or lost.

The FDIC closes the bank way before that happens.

[Dr.Phool]

12. So far this year, the FDIC is averaging over 30% loss to assets.

30% of 140 billion is 42 Billion.

If the trend follows, that leaves 8 billion to cover everyone else.

35% would put the FDIC on the hook for 49 billion. They'll be busted.

[lurky]

14. Fair enough. Let's look at IndyMac.

The bank had $16.5 billion in insured deposits, and according to an LA Times article from July, the bailout was expected to cost FDIC between $4 billion and $8 billion.
http://www.latimes.com/business/la-fi-indymac12-2008jul12,0,6071779.story

If we can generalize that expectation of a 25% to 50% loss, then a WaMu bailout could cost the FDIC from $35 billion to $70 billion, give or take. That's easily enough to break FDIC, barring a huge infusion from the govt.

I don't think there's any way the government wouldn't bail them out, however. If people lost all their money in WaMu, there would be a loss of confidence in other banks, and you would end up with a huge panic. Not to mention all the businesses that would be shut down, causing an economic disaster. Congress would never let that happen.

So, actually, I'm more worried about all the bailing-out our government is going to have to do than with my bank balances disappearing.

[amandabeech]

21. If this keeps up, it would not surprise me if we see another Resolution Trust Company

to accept, unravel and liquidate underperforming assets of closed or merged banks in an orderly manner. Fire sales don't usually net the biggest payout.

Look for the FDIC insurance premium to go up at some point, too.

[debbierlus]

5. And, they all fall down......

[ozymandius]

8. I was about to post this FinnFan. Glad you did.

WaMu is next on the death watch. UBS, though a different banking animal than WaMu, is also on the ropes. There are very few (to none) suitors for either of them should they wish for a rescue.

[Dr.Phool]

11. I just saw the CEO of Wachovia on CNBC.

I didn't catch the first part, but apparently Maria had just interviewed Meredith Whitney before he came on.

He was talking about what a great position they were in despite all their exposure to the California real estate market. Maria said that Meredith said that he was using some very overly optimistic numbers. He said that anyone can use the numbers they want, and it was a matter of interpretation.

So, if I walk into Wachovia tomorrow and ask them for the 20k I have deposited there, and they say that I only have 10k, can I say that's just a matter of interpretation?

I do know one thing. I do have 10k in a Wachovia money market account. First thing tomorrow, it will still be in Wachovia, but in a safe deposit box in the form of Krugerrands.

[slackmaster]

10. Wah!

Moo.

[hay rick]

15. WaMu ShaMu

What's another whale going belly up? I sold all my WaMu stock and put my money in AIG.

[lse7581011]

16. Oops! n/t

[superconnected]

17. I bank at wamu so I'm a bit more afraid.

[Hugabear]

18. If you have ANY money in WaMu, take it out now before it's too late

My wife and I both bank with WaMu, I'm already looking for another bank to put my money in.

[Fire_Medic_Dave]

20. Wow that's huge.

They have my mortgage.

[radfringe]

22. want to know who's on who's board of directors? quite the

incestuous bunch

check out THEYRULE.net

Please note that you will need Flash Player 7.

A Brief Explanation
They Rule allows you to create maps of the interlocking directories of the top companies in the US in 2004.
The data was collected from their websites and SEC filings in early 2004, so it may not be completely accurate - companies merge and disappear and directors shift boards.