WaMu credit rating downgraded to junk

WaMu Rating Lowered to Junk by S&P on Mortgage Losses


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.

``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 slid 36 percent last week alone, a record decline. The lender ousted its chief executive officer and disclosed that its main regulator has told it to boost risk management and compliance. The bank on Sept. 11 said in a statement that retail balances at the end of August, of $143 billion, were ``essentially unchanged'' from the end of 2007.

WaMu's $1 billion of 5.125 percent notes due in 2015 fell 11 cents to 34 cents on the dollar today, according to Trace, the bond-price reporting system of the Financial Industry Regulatory Authority. The debt yields about 27.9 percent, or 24.5 percentage points more than similar-maturity Treasuries, Trace data show.

Comment: I think Wells Fargo should buy WaMu! Same footprint!


  1. Somebody needs to write a book titled "Merrill Lynch, Wachovia, Washington Mutual, Lehmann; what not to do if you're running a bank."

    If Wells Fargo buys one of them, they need to get rid of every manager at the director level and above and replace them with people who understand the risks of some of these types of loans.

  2. I was listening to Joe Biden on CNN as I was awaking. Wow is that guy a blow-hard!

    But to my point: He was blaming the Bush administration for this mess.

    My view ... our culture is so addicted to debt (I actually believe that sometimes it is good to borrow) and the perception that everyone should own a home or a new car.

    We are a debt economy not a savings economy. Our tax system punishes investors and savers and rewards the consumer who does not save or invest.

    Up is down and down is up!


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