WaMu

Mortgage underwriter tells all about WaMu

Jim Kim — Sun, 02 Nov 2008 09:02:09 -0500

"At WaMu it wasn't about the quality of the loans; it was about the numbers. They didn't care if we were giving loans to people that didn't qualify. Instead, it was 'How many loans did you guys close and fund?'" This according to former WaMu underwriter Keysha Cooper. She could have worked at lots of companies and come to the same conclusion. She shares her story as one of 89 employees whose accounts are contained in a suit against the thrift by an Ontario pension. She says starting about 2006, the company started ramping up the pressure to close loans at all costs. No loan was suspect. "You were like a bad person if you declined a loan," she said. She was sure that a lot of fraudulent activity was taking place. She ended up being put on leave for refusing to sign off on a loan that was plainly just wrong. Brokers sometimes tried to bribe her to approve loans. This is akin to inviting regulation.

For more:
- here's the New York Times article

Washington Mutual

Dan Bowman — Mon, 29 Sep 2008 15:41:14 -0400

Who: Washington Mutual

What: 13^th bank failure of 2008 (Sept. 25, 2008)

Where: Henderson, Nevada and Park City, Utah

Why: Poorly hedged mortgage bets, and losses in its big credit loan portfolio and on mortgage loans. A $16.7 billion bank run over a 10-day span triggered the takeover by the government.

Fast Facts: Before its collapse, WaMu was the sixth-largest bank in the United States...its failure is the biggest in American history; Washington Mutual Bank and its subsidiary, Washington Mutual FSB, had combined assets of $307 billion, with $188 billion in total deposits; JPMorgan Chase acquired the assets and liabilities for $1.9 billion; FDIC Chairman Sheila C. Bair said of the bank's failure "For all depositors and other customers of Washington Mutual Bank, this is simply a combination of two banks."; WaMu's failure occurred on the 119^th anniversary of its founding; prior to failure, WaMu ranked No. 12 on a list compiled by Ladenburg-Thalmann analyst Richard Bove of institutions that were likely to fail.

View the press release

The U.S. Banking Collapse

Dan Bowman — Mon, 29 Sep 2008 15:10:30 -0400

From 2003 to 2007, there were 10 bank failures in the U.S. Already in 2008, 19 banks have failed, with the lowlight being the collapse of Washington Mutual on September 25--the biggest bank failure in American history. What other banks have failed this year? Read on to find out.

WaMu, saved in the nick of time?

Jim Kim — Tue, 23 Sep 2008 12:29:28 -0400

All seemed lost for Washington Mutual just as few days ago. AIG had just cratered, as had Lehman Brothers. Everyone knew WaMu was on its last legs. Goldman Sachs staged an auction that attracted no legitimate contenders. But then came news of the massive bailout plan, which seemed to give new life to the fading, old thrift. Potential buyers are back, driven in part by the prospect that the government will take on the worst of WaMu's loans. The New York Post reports "expressions of interest" from the likes of Citigroup, JPMorgan Chase, Wells Fargo, HSBC and Spain's Banco Santander. Moody's Investors Service downgraded WaMu's financial strength by one notch yesterday as well as its preferred stock rating. There has been no run on the bank, in part because most of the accounts are less than $100,000 and insured by the FDIC.

For more:
- here's the article

Possible deals abound involving big-name banks

Jim Kim — Wed, 17 Sep 2008 17:52:43 -0400

If you're an investment bank, the stable deposits of a commercial bank, even an ailing one, look pretty attractive right now. Even before the news hit that Morgan Stanley was in talks with Wachovia, people were speculating that both Morgan Stanley and Goldman Sachs ought to think about deals. It makes a lot of sense for Morgan Stanley, providing assurances as to capital ratios. Other banks apparently have voiced interest in Morgan Stanley as well. For them, the idea may be a bit less compelling. They get to be part of a much larger, very diversified enterprise that might offer some product synergies. As for Goldman Sachs, the big news was that it was conducting an auction of Washington Mutual. Wells Fargo, HSBC and JPMorgan Chase are said to be interested. But you have to wonder if it's thinking about buying a bank outright.

For more:
- here's an article about Morgan Stanley in the New York Times
- and here's one about WaMu

Related Article:
Bank merger deals not likely

Who's really calling the shots at WaMu?

Jim Kim — Mon, 08 Sep 2008 13:01:32 -0400

Washington Mutual made headlines when it announced that the board had finally ousted ex-CEO Kerry Killinger, instead hiring Alan Fishman, currently chairman of New York commercial mortgage broker Meridian Capital Group. The real news was that the company signed a memorandum of understanding with the Office of Thrift Supervision that requires changes in risk management and compliance programs. You can bet the ITS will take an active role in trying to keep WaMu solvent. This is merely the latest indication that federal regulators are putting an increasing number of banks on effective probation, "forcing them to fix their problems and try to avoid potentially costly failures. The secret agreements can force banks to take steps including raising capital, cutting back on risky loans and suspending dividend payments," Dow Jones reports. These memorandums are "often a precursor to more-severe, publicly disclosed enforcement actions if conditions don't improve."

For more:
- here's the article

WaMu, TPG deal stokes controversy

Jim Kim — Mon, 16 Jun 2008 07:35:42 -0400

Washington Mutual pitched its deal with private equity giant TPG in April as a way to heal the troubled thrift. But for some critics, the deal was way too sweet for David Bonderman, who joined the WaMu board as part of the package, according to the New York Times. WaMu sold them 176 million shares at a price way below market; it also sold 20,000 preferred shares with a low conversion price. And then there were the warrants, also with a very low conversion price, all of which adds up to dilution in a major way. The problem is that the deal also carries some terms that would prove punitive if shareholders were to reject it, including some special dividends with high interest. Some shareholders are up in arms.

For more:
- here's the New York Times article

Washington Mutual board makes big changes

Jim Kim — Mon, 02 Jun 2008 21:31:21 -0400

The board of Washington Mutual is getting busy, as it should. It certainly doesn't want to be seen as a done-nothing sort of board that fiddled while the company burned. It announced that it has stripped controversial CEO Kerry Killinger of the chairman title. This is somewhat foreboding. Recall that Ken Thompson of Wachovia was similarly stripped before he was ousted outright. The WaMu board also issued a requirement that directors receive a majority of votes. And it named key outside directors as chairmen of the finance, governance and corporate relations committees. It also said it wants to hire more outside directors. Will this be enough? The jury is still out, but the at least the board is making the right moves.

For more:
- here's the release

ALSO NOTED: Another deal in trouble: Bell Canada; Blackstone reaps investment funds as performance tumbles; and much more...

Mon, 19 May 2008 06:59:50 -0400

Company News:
> Blackstone reaps investment funds as performance tumbles. Article
> Citigroup to sell German retail bank. Article
> E*Trade outlook bright? Article
> Lehman to cut jobs this week. Article
> WaMu cuts home equity credit to customers. Article
> PNC a symbol of regional troubles? Article

Industry News:
> Another deal in trouble: Bell Canada. Article
> New Fed securities-swap facilities stoke controversy. Article

And Finally... People trading down to cheap beer. Article

Tough times at WaMu

Fri, 02 May 2008 06:59:57 -0400

While analysts generally applauded the move by Washington Mutual to exit the wholesale mortgage business and shutter retail loan centers, there is always a human toll to such moves. Business Week takes pains to note that among those who were let go were a group of high-performers who had just spent a lavish week in the Bahamas on a junket for their production. Many of these people--some were members of the President's Club--will find work at other companies. Still, this is an example of the big come-down in the industry. The excess has been eliminated. The most they can hope for is a gradual return to normal; the silly-season days are over. That's a good thing.

For more:
- here's the article