After Massive Financials-Led Rally, WAMU Drops Bomb

Posted on July 22nd, 2008 in Daily Mortgage/Housing News - The Real Story, Daily Stock Market / Economic News - The Real Story, Mr Mortgage's Personal Opinions/Research

After a mega-rally led by the financials that left the XLF up 8.4%, WAMU drops the bomb. I will add to this post as more news is released.

-WAMU 2Q Non-GAAP EPS ($3.34) vs ($1.05)

-$3.33B 2nd Quarter Losses

– Q2 Net Charge-Offs $2.2B

-Q2 Interest Income $2.3B vs $2.03B (perhaps due to negative amortization phantom income)

-Q2 Non-Performing Assets 3.62% as of 6/30

-See Residential Mortgage Portfolio Losses at Upper End of Range

-Q2 Loan Loss Provisions at $5.91B vs $3.51B

-Boosted Loan Loss Reserves by $3.74B to $8.46B

-Has over $40B in ‘readily avail liquidity’ at EOQ (Countrywide had $50B they said in Q1 just before they took the final blow)

-Sees ‘early signs’ of subprime and heloc default stabilization (what they are not telling you is what I have been saying for a few months now, that Alt-A and Pay Option ARM defaults are spiking. Who cares about subprime?).

Remember, WAMU’s CEO can’t lie too much about the numbers because they are being watched too closely by everyone, including the Feds. They also have that God-aweful $7B capital raise they did last quarter hanging over their heads. If I am not mistaken, they owe TPG big time if they raise money under $8.75 per share.

This report was just ugly, except that the CEO said ‘everything will be just fine down the road and we are sufficiently capitalized to manage the crisis.’  How many times have we heard this?

After the full news was released, the stock rallied almost 15% in after-hours trading. The rally is your tax dollars soon to be at work in the form of Paulson’s and Dodd’s massive bailouts.

I think it’s time for the banks, after such a massive rally that took many of the hardest beaten banks back to their 2008 highs, to raise ‘equity’ capital. They may not get another chance at these levels. A week ago their stock prices made it prohibitive.  Watch out shareholders, you are always the last to know and have the most to lose.

If I were a bank CEO knowing that my mortgage loan default and REO numbers are growing, housing is continuing to weaken, the economy is weakening and the credit and stock markets are on shaky ground, I would be throwing out an ‘equity’ capital raise this very moment while my stock price is surging. 

Hank Paulson said just yesterday on bubblevision (loosely quoted) ‘I keep saying the same things to the banks as I have for months and that is to sell ‘assets’, de-lever and raise capital’.

Come on banks, hop to it!  Why not do it now and start being part of the solution?  Many top market forecasters, including Bill King, think this is simply “an SEC-induced short squeeze and dead-cat bounce in a bear market, as back offices scramble to rectify the endemic problem of ‘fails to deliver’ that has persisted for years.  Once compliance occurs, it’s ‘goodnight, Gracie’.”

If true, there is no better time than the present to issue shares.  Why gamble on an unknown future with your stock price and share holders money?  It is easier to shore up your balance sheets now by issuing equity when your stock prices are way up, than spending all quarter figuring out how to put together a ‘good’ earnings report.  -Best, Mr Mortgage <>


Time for Banks to Raise ‘Equity’ Capital – Go-Go-Go…Quickly!

Mr Mortgage on Fannie/Freddie Massively Underestimated Risks

Mr Mortgage: June CA Foreclosure Report – Conditions Worsening

IndyMac: One More Lie for the Road! Consumers and Brokers Beware

The Pay Option Implosion – Subprime’s Big Brother

Look Out! Here Comes the Alt-A Implosion

Mr Mortgage onMortgage Modifications Part 2 – BEING FORWARD THINKING

23 Responses to “After Massive Financials-Led Rally, WAMU Drops Bomb”

  1. It’s $8.75 – as per bloomberg article:

    As losses mount, a clause in the TPG agreement makes it more costly for WaMu to raise capital or be acquired. If WaMu is sold for less than $8.75 a share or is forced to raise more than $500 million in equity, it must compensate TPG for the difference, according to filings with the U.S. Securities and Exchange Commission.

    and the stock is up – jesus.

  2. The PPT was busily plunging today with all their might – and we saw the S*** float.

  3. Every time a CEO says everything is under control, that is the sign to run for the hills.

  4. The stock is up because a little bald man on bubble vision told his sheep to buy the banks last night. LOL!

    When the industry seems to be all about smokey mirrors, how can “transparency” ever occur?

  5. Choice quote from Henry Paulson, August 1, 2007:

    My starting point is what is the state of the economy? We have the strongest global economy I’ve seen in my business lifetime today. We have a healthy economy in the U.S..

  6. Those sneaky little bastards…

    They are actually on my future “Bail Out” list already. It really doesn’t matter much because they won’t be around any longer at some point real soon…

    Anyone investing in them is a fool in my opinion, and deserves to lose every penny they invested (hello over 100K IndyBank depositers!).

    A Billion here… a Billion there… and pretty soon you are talking about REAL MONEY!!!

  7. OD, your are much more correct than you would ever even begin to imagine… trust me on that one!!!

  8. Admin, you say ‘The rally is your tax dollars soon to be at work in the form of Paulson’s and Dodd’s massive bailouts coming soon.’

    What form do you think that will take? (Fed propping up WaMu directly, or just WaMu stock price riding on the coattails of the GSE rescue?).

  9. I need a sanity check,I have to be missing something.WAMU takes this hit stock rallies,Wachovia announces 9Billion write down stock rallies. What is wrong with this picture. Are we so far into this that all have become numb?Or are we just buying into this suckers rally. Is the american investor just a bunch of sheep being led to the slaughter or am I the village idiot?????

  10. Maybe it’s just the PPT that’s bullish on the banks? Maybe it’s just day traders or covering shorts? Maybe there are more Greater Fools out there than we think? The banks will go ‘belly-up’ unless……..they are too big to fail. Hanky-panky will have to go back to Congress soon and ask for more blank checks to bail out banks that are ‘vital’ to our ‘fundamentally strong economy’. Congress will have to approve those bail-outs – or they will be blamed for the ‘Financial Armageddon’, come election-time!

    Those diabolical Zionist planners are NO DUMMIES!

  11. nice post EO

  12. […] After Massive Financials-Led Rally, WAMU Drops Bomb […]

  13. Thanks, admin! I’m trying to discipline myself to stay ‘on topic’. It’s just that I have this vast collection of priceless dots that I have to deliver. So many dots….so little time! 😉

  14. Please ladies and gentlemen..the problem with subprime is CONTAINED, the problem with Neg Am loans is CONTAINED, the liquidty of the banks is CONTAINED..can someone please turn that off!

  15. This is not surprising that the stuff hitting the fan is starting to accelerate for Wamu. Coming from the lender that kicked back 25 BPS to my brokerage for each Option ARM and Alt-A loan, since we qualified for their Premier Broker Program.

    To kick back that money Wamu must have been making an absolute killing on those loans selling into the secondary market. Probably not the best idea.

  16. I am sure the negative amortization loan problems will be contained with the 11,000 people being laid off at Wachovia. The truth is that the stock racket it NOW convinced that anyways, by hook and by crook, the bankers will be bailed out by YOU the taxpayers. YOU and only YOU, will be paying for the whole mess. That’s the real message sent by the irrationnal monster rallye. Investors are convinced that Wachovia won’t fail because will have a blank check to plunder and rape the citizens.

  17. Wamu Wachovia. Washihgton. We will wash the taxpayers clean ! Woa ! Woa ! Hip ! Hip ! Hourra ! Hip ! Hip ! Hourra !

    Our friend Paulson has a blank check from John Doe for us. We are the bankers and we cannot fail. We got our buddies at Goldman Sachs that will fix it all.
    Hip! Hip! Hourra ! Good days are finally back !

  18. […] the visible stress of repeated lying and denying what is plainly undeniable Washington Mutual reported its bruising fiscal second quarter 2008 results as all could hear managements connection to reality […]

  19. Mark, you don’t need a sanity check because your comments prove that you are fine.

    The investors are going to get “Bailed Out” in their minds so they keep investing.

    Profits and losses don’t matter anymore because the profits are being derived from layoffs and / or dividend cuts. No REAL profits are being made. The losses mean nothing as well because he Fed will step in and help them out.

    There is simply no incentive to even try anymore. No incentive to do anything but line their pockets the best they can before they are ousted as a show of strength to the Sheeple and Bib Brother…

    Today the President will sign a bill he stated he does not beleive in because the 3.9 Billion provision is aimed at helping the banks and lenders and NOT the American homeowners in trouble. He would rather sign it and avoid a veto fight he says… go figure…

    What a lame duck! Here he has a chance to do what is right and cowers to the Dems and rolls over to have his belly rubbed instead!!!

    We are soon to all be homeowners of over 5.2 Trillion dollars worth of mortgages. A conservative estimate would place 2% at immediate risk of default. So we are on the hook for that right out of the gate. More will follow, and our taxes will be raised for sure to cover this cost.

  20. Stu-pendous ! 🙂

  21. […] After Massive Financials-Led Rally, WAMU Drops a Bomb […]

  22. afterhours stock quoteAfter Massive Financials-Led Rally, WAMU Drops Bomb

  23. The poor decisions WAMU has made in loan originations is carried right on through to their loss mitigation. As “Short sale” negotiators we deal with just about every lender out there and WAMU’S loss mitigation policies defy logic. Case in point: WAMU is junior to Countrywide where Countrywide has approved a short sale paying a 6% brokerage commission, and is also allowing WAMU $3,000 out of Countrywide’s net (WAMU only allows $1,000 to junior lien holders). Countrywide is losing about $60,000 on a $255,000 loan, and WAMU holds a $61,000 2nd TD that they would be getting $7,000 on. The $7,000 is broken down as the $3,000 from Countrywide and a $4,000 concession from the real estate brokers out of the 6% commission already approved by Countrywide. WAMU says “no deal” we only allow a 4% commission to brokers. They absolutley do “not get” that they’re in the junior position and any extra money will be going to Countrywide as the senior lien holder. Aditionally, they won’t allow the home warranty or termite repairs to be paid even though both were allowed by Countrywide. Because of WAMU’s incoherent policies this will be another property to become a Countrywide REO wen the trusee’s sale is held on August 15th. How many of those deals is WAMU killing a day or a week? Multiply that by 7,000 and that should fuel a lot of anger from WAMU share holders. WAMU has the crazy idea that nothing is greater then something…that CINA idea must still be stuck in their heads.

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