Wamu and Lehman are getting torched. What are the solutions? Well, Wamu is sitting on some $120 billion in Pay Options, HELOC’s and Subprime. Best case, a suitor would take a $50 billion hit. Yes, the Treasury or Fed could back stop the purchase but that is still a lot of lost coin. On the other hand, the suitor would have 2500 branches on the West Coast and instantly be a major presence. It would take 15-years for Jamie Dimon to build this himself, using Chase as an example.
Lehman on the other hand has very little to offer anyone. I have no clue what their core competency is any longer other than providing office space for a bunch of people to go to every day to get out of the house.
All of this being said, what the heck gets thrown at these two problems to avoid a credit and stock market meltdown? On that note, why are large cap banks such as Wells, Chase, State Street and US Bank rallying?
After the massive Fannie/Freddie bailout there is not much they can do to top that. Therefore, the only thing they have left is an EMERGENCY RATE CUT. Hey, why not? They have not thrown money at it in a while, the dollar is rallying and crude is lower. If they were going to do it, now is the time.
This is all speculation on my part but my bet is for a cut sooner than later. -Best Mr Mortgage