Is WaMu's Cash Infusion Such a Great Deal?

On Monday, it was reported that Washington Mutual (WM) may get a $5 billion cash infusion from the private equity group TPG of Fort Worth, Texas, along with other investors. While it is positive that WM could get a infusion from others than the government, we still have some concerns, given that the company is due to release results in the next couple of weeks.

1) We suspect there could be additional issues for WM to warrant a potential infusion considering there were no positive statements from management with respect to some sort of "bottoming" of its mortgage exposure.

2) What did WM have to give up to receive the infusion (considering the term "Vulture Investor" has become a recent topic in the press around the country)?

3) What do the 1Q07 regulatory capital ratios look like? (Excluding the $5 billion could result in WM not being able to achieve the minimum to be categorized as "Well-Capitalized.")

With so much data pointing to a less than advantageous economic environment, we suspect that the more than 35% gain experienced by WaMu shares Monday is a bit overdone.

Comments

[daffy]

I have been watching WM for a few months now and was poised to buy a few days ago when it was blathering around 11, again. A coversation with a friend on Thursday pointed me in the opposite direction. Then again, we concluded that AMD might be bottoming out.

Here's what I think. WM is hiding. How many companies have been forthright about their exposure? Few, and I can only think of one. Others have lied, and it has and will continue to beat down the shareholders until they are whimpering puppies, bloody and ragged. I think WM has been especially liberal with it's willingness to hide behind other companies and letting the news direct attention away from them. I would suspect that this little jump will be followed by another fall of equal or greater magnitude. I don't think that $8.72 is unrealistic. There are a lot of earnings coming out in what was the worst Q yet. I say let it get hammered again, and then re-evaluate to see if the ship is going to sink at 2Q08.

[Rich_Wood]

How can any self-respected mortgage company claim "bottomout" or not at this time? Put yourself into similar role, do you have the guts to claim one way or another? To start with there is a big uncertainty about congress/government's mortgage. One earlier report mentioned that government may buy distressed loans at 85% face value from mortgage holder; if passed that will be the sure bottom.

Hard to argue where WM really worth. Open it's book for public view will not help either. However it's rather safe to say WM has more upside potential than downside. A relative safe paly is to buy stock/sell short-term call and take advantage of volatility.

[drmalaka]

We have yet to see a bank do well that got capital why should this be any different? Citi at $31, BSC at $100. LEH will find its way back down soon enough. When these banks have to raise capital, especially on lousy terms, it is not good news.

For anyone who thinks this is good news and sent the stock up $3 then the real problem was that the price of WM prior to this news was completely inflated. For this news to be positive then the street would have already have had to discount the trouble the bank was in. But at $10 the street had not factored in all the bad news.

Like the LEH financing, yes WM should have gone up $3 yesterday, but it should have gone from $3 to $6. Since the stock was trading at $10 at the start of the day that value did not represent how much trouble WM is actually in.

[moonscope]

Richard j Pollak 4541 C.R.138A Alvin Texas 77511 [e-mail]

Citi also getting Billions, from same Return of CEO Stock option Severances , Fed states Housing 100 Billion behind, Gas Prices and 401Ks suffer all. 4/6/08 Foreclosure notice because Payments denied Credit, Civil Rights Defender needed.

Just Cause Case was proved Pretrial by Lender Statement evidenced, admitting that Loan Originator Breached standard Bank One N.A. DEED Stipulation {Cover Page, Bold Print} Prepayment Clause of required Signature, defined in Statement by Lender as a Loan Originator “Principal Curtailment” meaning Coveted Prepayment, Stipulation states for Damage assessment Lender return Funds to ease Arbitration. Stipulation enforcement or lack of enforcement becomes Case Law relevant, all encompassing, exacting Check Payment Credit, US Supreme Court decision was and is sought, by Jury or Judgment assessment.

Loan Originator Bank One N.A. Action was reverse payment, suspended payment then “Curtail” Payment to pay Principal only {reducing 180 Month Term commitment} without informing. Then transferred Loan to Homeside Lending now Washington Mutual, Homeside Lending Loan Manager remained Managing Loan for Washington Mutual.
Lender Statement, admitted Pretrial that in effort to reverse “Principal Curtailment” wanting to balance new account received, Loan Manager Errantly reduced Escrow {I call it} “Escrow Curtailment.” further damaging Loans Escrow.
Real-time Loan Statements Evidenced support contention that both “Curtailments” related to November 2001 because December 2001 was never Credited {skipped} supported by False IRS 1098 Tax Form, claiming Taxable funds received, after Transfer' in 2001.
Following “Principal Curtailment” Transfer and “Escrow Curtailment,” Escrow was used to Pay Property Taxes in 2001 creating Escrow Shortage.
Escrow Shortage was increased and Clouded by action of phantom Escrow Surplus return, received but disputed, requested Loan Payment History from Bank One was refused, Homeside Lending Coveted from {the First or Fifth of} November, Loan Payment History that began only on November 28th, time-frame omitting “Curtailments with intent, all Real-time Statement dispute December Payment Action, including Twice requested received Loan History early 2002. Bank One History and the “Curtailments” some 28 days, was first received on December 15, 2005 release of Bankruptcy Stay day.
Loan Managers “Common Practice” Testimony ignores DEED Cover Page, Bold Print and Escrow Management Duty.

Trial concluded 100 days later Judgment received US Mail just days before Appeal time-frame expired, $1,000.00 for ignoring RESPA request Award, without actual Loan Damages was Appealed on the12th day following Judges Signature.
Judge allowed Ten Days to Appeal despite Bankruptcy Rule {RULE 2005 = Presidents Five additional Days allowance} the Ten Day restriction was Unpublished with Clerk of Court, documentation of delaying Judgments Posting.
New Appellate Attorney was needed because of multiple failure to attend Hearings by Trial Attorney, Judge refused {“Excusable Neglect”} Appeal, Second Appeal waited for ENRON Trial conclusion, Docketed for ENRON Judges first Case following ENRON.
A ppeal was denied, then Fifth Circuit also denied, Printer never received US Supreme Court Cert. Petition, Merit was DEED Stipulation Paragraph Edit on Judgment not folly of Excusable Neglect that Appellate Attorney Appealed.
Day Rate damages was Substance of Lawsuit, $1,000.00 Award was Appeal, Attorney received expense Judgment, December 2007 Washington Mutual returned $7,515.98 Loan Payment Muting Judgment with Fault Admittance, skirting Commitment Damages keeping Curtailments, threatening with Foreclosure notice 2008 but My demanded Proof of Payments impossible, new Washington Mutual Foreclosure Attorney dropping client Washington Mutual.

Sued Washington Mutual Core Adversary under Seal Judge changed defendant to Homeside Lending allowing Washington Mutual Attorney to call Homeside Lending to Testify, reversed for Judgement Award Payment, but Board Certified Attorney Certified Mail RESPA request {ignored by Washington Mutual} became inadmissible. My lay person RESPA request was being ignored, BBB forwarded and was also ignored, RESPA request received the only damage Judgment, {thanks to the BBB support} substance matters related in RESPA request that Judge took under advisement pertaining, was absent from Judgment and ignored to date.