Fed tries to woo suitor for WaMu
- 17.09.2008
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The Fed is looking to avoid the inevitable bankruptcy and receivership of the nation’s largest S&L, Washington Mutual, by playing matchmaker this morning. Now that they’ve gone and loaned AIG $85 billion, the government knows it will be on the hook for a huge chunk of cash when WaMu folds. So, like that pesky buddy always trying to set you up with their girlfriend’s friend they’re out looking for suitors.
The problem? Washington Mutual is a freaking train wreck. With profits made from air, a huge book of Option ARM loans that are probably worth pennies on the dollar and a lack of loan loss reserves - this company is headed straight to the dead pool. Who wants to touch the train wreck?
The government I’m sure will come up with some ingenious plan that socializes all the bad debts and makes the huge retail branch and depositor base seem uber-attractive to anyone left standing with enough cash to absorb the company, and the losses that are hidden underneath the current carpet.
From CNNMoney.com:
The U.S. government has been reaching out to large banks in an effort to organize a buyout of the beleaguered Washington Mutual Inc (WM, Fortune 500)., according to a person briefed on the talks between regulators and banks.
The obstacle, however, is that “no one knows what’s in their books,” the person said, speaking on condition of anonymity because of the sensitivity of the matter. There could be, he said, “a minimum amount of value there.”
A New York Post report Wednesday citing unnamed sources said regulators have reached out to Wells Fargo & Co (WFC, Fortune 500)., JPMorgan Chase & Co (JPM, Fortune 500). and HSBC Holdings PLC, among other institutions. The Post noted that no discussions of a deal between any of those banks and Washington Mutual were under way.
