Money
“Credit- default swaps indicate there’s an 80 percent chance WaMu will default in five years.”
Washington Mutual Inc., the largest U.S. savings & loan, failed to interest suitors in a purchase this year because new accounting rules for devalued loans are driving away buyers, two bankers involved in the talks said. The stock fell 30 percent to an 18-year low….WaMu fetched $2.32 at 4 p.m. in New York Stock Exchange composite trading, the lowest since Nov. 27, 1990. Credit- default swaps indicate there’s an 80 percent chance WaMu will default in five years. WaMu and National City are the worst- performing stocks in the 24-member KBW Bank Index this year….
At WaMu, the percentage is even higher: $240 billion of loans are 77 percent of assets…
As potential acquirers steer clear, financial companies may be forced to seek capital from investors burned by earlier rounds of fundraising. Shares of U.S. banks that raised money have declined by an average of 45 percent after capital infusions, Goldman Sachs Group Inc. said in a July report. Both WaMu and National City raised $7 billion in April by selling shares at a discount to their market price.
(Emphasis added by me.)
Like I said, call me a chicken little or cynic if you like. I still think it’s time to end the rodeo, and start solving this problem.
Comments (11)
Hi Chicken Little, I'm Cassandra. Pay no attention to the men behind the financial curtain, they know what's best. Oh, and never mind the Russian bombers currently in Venezuela.
Posted by PopTart | September 10, 2008 5:28 PMWhile it no doubt sucks for the investors, the situation does bring out my Schadenfreude. All those self important business minds are getting their comeuppence.
Posted by Zander | September 10, 2008 5:47 PMYou'd think that if they understood their industry this could have been avoided.
5000+ Seattle metro jobs up in flames from a WaMu implosion is a bad thing.
The shit hasn't hit the fan yet, folks.
Posted by grizzly bear | September 10, 2008 5:51 PMsolve the problem how? like i said earlier, there's not much choice other than letting shit hit the fan and enacting new rules and regs and discontinuing ineffective or unintended consequence laden government policy, or feed a terminal patient more morphine until shit hits the fan.
Posted by Bellevue Ave | September 10, 2008 5:57 PMalso, how many businesses is the government going to "rescue" before the sting of failure doesn't mean anything? or have we already hit that point?
Posted by Bellevue Ave | September 10, 2008 6:02 PM@5, Moral Hazard, RIP
Posted by Jubilation T. Cornball | September 10, 2008 6:29 PM@5, I think we may have already hit that point. Nobody likes the destructive side of capitalism, where the weak business die off and the strong businesses thrive. What we have now is "crony capitalism."
Posted by MikeSF | September 10, 2008 6:32 PMMy wife has worked there 11 years now. She's hoping for a layoff with a nice severance. We'll see if they don't screw her out of it.
Posted by Matt from Denver | September 10, 2008 6:32 PMa default within five years is bad, sure, but who actually understands what credit-default swaps are? why is that bold? who is supposed to know if it is meaningful that they are predicting this?
Posted by whatever | September 10, 2008 9:56 PMThe market is "predicting" this, but the market is driven far more by emotion and FUD than by rationality. Of course, create enough FUD and you can bring about a new reality (see: run on bank), but this 80% failure in 5 years hooey is no better than getting my future predicted by an astrologer.
Posted by Are markets emotional or rational? | September 10, 2008 10:18 PMThe time to buy stocks is when nobody else thinks they will ever go up.
Here endeth the lesson.
Posted by Will in Seattle | September 10, 2008 10:58 PMComments Closed
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