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Will WaMu Sell or Face Same Fate as Lehman Brothers

Published 09/18/08 Dustin Ensinger - Print Article
E-mail - editor@economyincisis.org

It appears that the next financial giant to fall will be Seattle-based thrift Washington Mutual. The company has put itself up for sale and hired Goldman Sachs to explore a possible buyout, according to RTE Business. Likely suitors include Wells Fargo, J.P. Morgan Chase and HSBC.

The mortgage meltdown has taken its toll on the nation’s largest thrift. Driven by losses on subprime mortgages, the company’s shares have fallen 94 percent over the past year and have lost $6.3 billion over the past three quarters. Recently, both Moody’s Investor Service and Standard & Poor’s have downgraded WaMu’s credit rating to junk status.

If a sale is not negotiated, WaMu may end up being part of the massive wave of recent government buyouts. The government has already swooped in to rescue American International Group, Merrill Lynch, Bear Stearns and mortgage giants Fannie Mae and Freddie Mac in a very short period of time - effectively socializing the risks of those companies, but allowing the rewards to remain privatized.

Or the company could suffer the same fate as Lehman Brothers, which was allowed to fail and filed for bankruptcy.

Whatever the outcome, the impending sale or doom of WaMu is indicative of the financial crisis that has sharply come into focus in recent weeks. Our failed economic policies have left our nation vulnerable. The struggles of Main Street are finally making their way to Wall Street.

Source RTE Business:

Washington Mutual, the giant US savings and loan bank beleaguered by mortgage losses, has put itself up for sale, sources familiar with the matter said last night.

The Seattle-based bank has hired Goldman Sachs and Morgan Stanley to run an auction and potential suitors include Citigroup, HSBC Holdings, JPMorgan Chase and Wells Fargo, one source said.

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