Washington Mutual Inc.’s stock continued its roller-coaster ride today, on speculation that the Seattle-based thrift was nearing a deal for $5 billion in capital.WAMU is up 32% to $13.50. TPG was formally the Texas Pacific Group which, if memory serves, tried to buy Portland General Electric.WaMu’s stock was up 17% as of 10:30 a.m. Eastern time today, as investors rallied on the news that private equity firm TPG and others would shore up the bank’s capital position. In the past six weeks, the bank’s stock [ticker: WM] has dropped more than 40%.
WaMu has been hit especially hard by the mortgage crisis, being referred to by some as technically insolvent. In January, the lender said it planned to set aside as much as $2 billion for credit losses in the quarter. But last month Moody’s predicted that WaMu would have to set aside far more — $12 billion of loan-loss reserves. At the time, the rating agency slashed WaMu’s debt rating to one step above junk status.
Though it appears WaMu’s shareholders have been assuaged, their relief may be short-lived if Moody’s predictions are correct.
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