Hey, Congress, Guess What? WaMu's Toast 44 comments
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Stick that in your eye, Congress. Reportedly, the unexpected federal takeover of Washington Mutual (WM) will leave no value to either shareholders or bondholders. Will taxpayers notice that another $2.5 Billion in market cap has evaporated from their S&P 500 401-K holdings in the morning?
Hey, it's all Wall Street guys, after all ... (wait a minute, isn't WaMu out here in the Pacific Northwest?) And your constituents are furious with this bailout, aren't they? Take your time, guys, we all want to be assured that you "get it right." And special good work to the credit agencies that downgraded the firm yesterday and today. My personal kudos to you.
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This article has 44 comments:
Why aren't these FDIC takeovers reviewed by the courts? Stockholders and bondholders of WaMu should demand such a judicial review.
JP Morgan's getting firesale deals here - must know some ppl high up there...!!
mining101.blogspot.com
with WM sinking, and more bush financial terrorism, bailout will be probably even increased, eventually saving the day, for all those at gse (fre/fnm) and aig.
people(read: congressmen) will panic to a point where the last thing they want is to be blamed by not have saved the country when they could have.
As a matter of fact, there was and has been - something to the tune of 17 billion bucks over the last 10 days..
$307 billion of assets less $188 billion of deposits (and dropping fast) = $119 of Jr. Capital and Equity they did not have. With the dropping deposit base, they could not fund the carry of those assets and like others, they could not sell them for anywhere near what they had them on the books for. And so the great WAMU that brought us Starbucks style "Ocasio" branches in strip malls finishes its circle around the drain.
Disclosure: worked for WAMU from 2001 to 2003 in their failed effort to build a commercial bank. Saw first hand their shoddy mortgage machine. Sold options at $45 and $46. Happily in line with a shovel at their funeral.
In my 15+ years of investing, I never felt angry in losing money. I have lost lots of money in the market, but never felt the market is rigged or angry. Today, when WaMu is taken out, I truly feel the system is rigged. Yes I have lost tons of money. Yes I was stupid to be invested in this so long. But, $26 billion equity and $310 billion assets are taken out for nothing!
Is the management stupid not to agree for a deal?
Is rating agencies stupid to double down-grade on back to back days? BTW, why no one is investigating them?
Is FDIC don't see the bailout debate? Can't they give few more days for WaMu?
The ordinary investors are massacred. Today, I truly believe, the worst capital market for small and individual investors is US. There is no one to protect individual investors. Everyone is trying to kill the individual investors, and you can do that with impunity.
-they are nationalizing private property, and it's not just wall street fat cats that suffer, it's everyday people who have 401ks and stock portfolios to supplement our bankrupt social security system. What a travesty
FDIC finds $10,000,000.00 in cash lying in the street.
Sells it to JP Morgan for $10.00.
Boy is JP Morgan getting all the sweetheart deals or what? You would think that the FDIC might at least get a second bid before giving everything away to them
CM001 you may be right. Some people seem to get a first shot all the bargains with no competition or regard for who gets shafted.
WAMU's problem is that $26 billion you're referencing is book equity. Balance that against the fact that roughly $227 billion of their $307 billion in assets were real estate loans and more than half of that real estate portfolio was in home equity loans, adjustable-rate mortgages and subprime mortgages that are now considered risky. So they have $113 billion of the risky stuff. Last fall they shifted these assets over to hold to maturity status to avoid marking them down. Let's assume they could sell the stuff for 65 cents on the dollar to Bill Gross at PIMCO, a price he recently paid for such assets. Well, that's a $39 billion write down. Poof, there goes your $26 billion of book equity.
So with a liquidity squeeze forced by fleeing depositors, insufficient capital to support the assets, and you have WAMU down the drain. Don't feel bad, this bit the likes of TPG, Bill Miller (I personally warned him about WAMU at a Legg Shareholder's conference cocktail party in 2003), etc. It's a tough lesson to learn.
With this kind of selling present, I believe lots of other banks would have participated: giving away more than 5000 branches and terns of billions in deposits for a mere $1bn and change!
Anyone out there still believing in free market economy should have our head cut off.
I want to know how does one go about suing these people?
- WeeklyTA
No not half of their loans in sub-prime. ARM's not necessarily risky because the interest rate didn't go up. Those mortgage owners can still refinance. My point is even if a loan is risky, doesn't mean it is goign to be a complete charge-off. The house price may have fallen 10 or even 20 %, that doesn't mean WaMu is going to take a 20% hit. Lastly, they were still making +VE NIM. I am not saying everything is great. But the run on deposit was fueled by press. People were urging why there is no run on deposit.
Who is Bill Gross? I don't care. I don't care what Warren thinks. The reality is those guys really wanted these sacrifial lamps. Just for a second think that government didn't want to nationalize FNM or rather let some of their sr debt vaporize... do you think anyone would care who is Bill G....
Look if a mortgage is in default, then WaMu needs to take reserves/ charges. Simple. But after there current reserves, and charges still had $26 B equity. Then they were making money on the assets and still +VE NIM.
Maybe too late to grab a chair, but the music is winding down fast.
CM001, you will never get it. +VE NIM don't mean squat if you haven't fully marked the assets down and can't fully reserve for them. The market was not accepting the value they were carrying the assets at. The real time bomb in their portfolio are the Option ARMs because they can be kept current with minimal payment and they have negative amortization. No one can figure when those chickens will come home to roost. Sorry, but that's why they and you went bust.
Best,
Frank Miller
+VE NIM means they are earning money! You have to mark an asset only when it is impaired. When homeowners are paying a mortgage and when it is not in default why mark it. Look, I am not angry about the loss. But, I am angry about the way it was taken down. It is clearly co-ordinated event. Even in banana republics, there is some integrity but there is no such thing in US financial systems
the entire market is a joke these days.
And as much as Obama hates us, most common shareholders are regular people, pension funds, and retirements. Tired of his "we should do nothing that enriches the greedy investors" comments.
[Actually, I moved the bulk of what I had in WaMu and Key Bank to Wells Fargo two weeks ago, leaving just enough to keep the account open for after any new owners took over. I hope nobody has heard that Wells Fargo is in the FDIC Hospital ICU.]
"Investor concern about Wachovia mounted Friday after JPMorgan said it would take a $31 billion write-down on loans it acquired when it took over Washington Mutual Inc's banking unit on Thursday."
Like I said, their $26 billion of book equity was gone with that $31 billion write down. As I said, +VE NIM doesn't mean squat when you have no equity. Depositors were WAMU's lenders. They look to asset value and equity cushion. Eroded asset value, no equity cushion and the depositors start looking for the life rafts. It's how it goes.
Gee, now per my quick and dirty estimate of valuing the assets at 65 cents on the dollar (based on Bill Gross's recent purchase of similar assets) I got a $39 billion write down on the assets. I think that was close enough, while you're still thinking the $26 billion of book equity was there. My advice to you, stick to investing in mutual funds or bond funds. If you insist on investing in individual stocks, then do yourself a favor and avoid financials because you clearly do not understand them.
mining101.blogspot.com
mining101.blogspot.com
for all the wamu shareholders take a look at this blog
mining101.blogspot.com