Wamu's Wild Ride

Posted by: Chris Palmeri on June 10, 2008

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It’s been a rollercoaster ride these days for Washington Mutual shareholders. Yesterday the stock fell 17% to a 16 year low as UBS analyst Eric E. Wasserstrom predicted losses of over $27 billion by 2011, more than twice company estimates. Ratings firms had also downgraded a bunch of mortgage securities, sending all financial stocks down lower.

Today Wamu is up more than 11%, most likely because of Fed Chief Ben Bernanke’s comments yesterday that were reported this morning. Bernanke said high energy prices would likely lead to more inflation and the Fed would “strongly resist” that happening.

Last week Wamu ceo Kerry Killinger narrowly managed to hang on to his job, although the board brought in a new chairman. Could something else be afoot? A takeover perhaps? JP Morgan has long been rumored as a potential suitor. Even with the recent bounce, Wamu with its huge branch network, is valued at just $7 billion. I’m not saying I know anything more than that.

Reader Comments

Snoz

June 14, 2008 5:28 PM

Palmeri should have not written this article because the last thing WaMu needs is unfair bad publicity. This article singles out WaMu as if Citicorp, Wachovia, Countrywide, HSBC, UBS, CreditSuisse, Merrill Lynch, LehmanBros, CarlyeGroup, BA,etc,etc do not have problems related to the liquidity crisis. Because of this important glaring omission, Palmeri's journalism is irresponsible or negligent. His CYA, "I’m not saying I know anything more than that," is just an ineffective coy. It does not exonerate his poor judgment. At a time when CEOs of all banks are under fire for over-extending mortgage underwriting, Palmeri's singling out WaMu's Kerry Killinger is plainly unjustified. As a professional journalist at BW, Palmeri presumably has the writing skill to set the proper tone as well as eliminate unwanted innuendo that may have been inadvertantly introduced into this article. This article reveals that there is no supervision of Palmeri at BW.

Alex Bugeja

July 7, 2008 11:23 AM

Killinger should be fired. Period. He has been asleep at the switch and destroyed billions in shareholder value as a result. Now that old shareholders have been massively diluted, it is impossible to hope that much of that value will be recovered for many long years, if at all.

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About

BusinessWeek editors Chris Palmeri, Prashant Gopal and Peter Coy chronicle the highs and lows of the housing and mortgage markets on their Hot Property blog. In print and online, the Hot Property team first wrote about the potential downside of lenders pushing riskier, "option ARM" mortgages and the rise in mortgage fraud back in 2005—well ahead of many other media outlets. In 2008, Hot Property bloggers finished #1 in a ranking of the world's top 100 "most powerful property people" by the British real estate website Global edge. Hot Property was named among the 25 most influential real estate blogs of 2007 by Inman News.

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