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Is Washington Mutual Bankrupt? Why The Fdic Is Quaking In Its Boots

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To say that the stock market is jittery would be the understatement of the year. Rumors declaring Washington Mutual bankrupt are directly opposed by Washington Mutual news released by the bank itself, hoping to respond to the WaMu going bankrupt allegations, and attempting to put a happy face on the situation.

As the Dow Jones is transformed into Mr. Toad’s Wild Ride, the fear of a stock market crash is understandable. Washington Mutual stock – along with the Merrill lynch stock price and also the Morgan Stanley stock price – is taking a beating. Forbes quotes the Associated Press report that shows a sharp Washington Mutual stock decline on the latest Wall Street Black Monday.

Smoothing the Waters

The bank was quick to point out that yes, Washington Mutual stock received Standard  amp; Poor’s junk rating, but according to the Puget Sound Business Journal, WaMu wants it known that this does not have anything to do with a Washington Mutual bankruptcy, and instead everything with the current overall market conditions.

Well, okay, but this is a bit of a wishy-washy statement. Nonetheless, it served to reinforce investors trust in the floundering savings and loan – or perhaps it has the sharks circling on the look for an easy bite out of the market – and Washington Mutual stock is up a bit.

So, Why Should You Care About Washington Mutual?

First and foremost, WaMu is not your average bank. The New York Times reports that Washington Mutual is actually America’s biggest savings and loan. While in April Washington Mutual stock closed at $13.15 per share, in September its shares are trading at $2.39 each. Ouch!

An investment of $5 billion (yes, that’s billion with a “b”) made the Washington Mutual news and was supposed to ease investor worries a scant five months ago, when it became obvious that WaMu’s mortgage side of the business was seriously floundering. It is not reassuring that the Times compared the losses Washington Mutual reported to those seen in the 1990s, at the height of the savings and loan fiasco.

Latest Washington Mutual News Little More than Lipstick on A Pig?

It is clear that the drop of the AIG stock price, the possible Lehman Barclays deal that might help the Chapter 11 bound fiscal institution of much renown, and the skittish Dow Jones do little to allay fears of a stock market crash; when the New York Times posted a follow up article this month that that calls into question the results of the cash infusion into WaMu’s business, all bets were off.

This makes me wonder if the protestations to the opposite by WaMu officials are little more than an attempt to smear lipstick on a pig, and although the Treasury bailed out Fannie Mae and Freddie Mac, its failure to act with Lehman Brothers does not bode well for Washington Mutual.

The FDIC is also keeping watch. With WaMu being the biggest savings and loan, a belly up move will put at risk $310 billion (with a “b”) in assets, making the deposit insurer liable to step up to the plate.

This begs the question: is the Washington Mutual response to its latest stock rating little more than an attempt to rearrange the deck chairs on the Titanic, or is there really hope? It doesn’t look good. With the right San Diego bankruptcy attorney to help you stop wage garnishment, the charges should be considered for hiring the services. The response to the clients should be immediate through the lawyers.