Monday, April 7, 2008

A brief blip of good news for Washington Mutual

Back in November, HingeFire outlined that Washington Mutual was going down in flames. Today, WaMu received some good news that sent the already depressed stock up nearly 30%. WaMu is close to landing a $5B cash infusion from private equity group TPG; this will enable the bank to survive into 2009 without becoming illiquid. Of course, Washington Mutual (WM) had to basically give away the house to land these funds; nearly 25% of the outstanding shares, a seat on the board, and all sorts of other preferences. This appears to be the best deal that WaMu could land, considering their perilous….and nearly bankrupt position. Sadly the five billion dollar investment will not take Washington Mutual out of the woods; at least an additional $8 billion is needed to cover impending loan losses this year.

Many victims of Washington Mutual’s service practices will state that this fate is well deserved. Some are upset that the bank has not gone completely under. In reality the most likely course for WaMu still involves its acquisition by another institution.