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Washington Mutual pressured as economic storm intensifies

US officials are fiercely putting out a series of economic fires with all eyes now focused on the fate of Washington Mutual after AIG AIG addressee indicator group (US DoD)
AIG American International Group, Inc
AiG Answers in Genesis (religious group in defense of Scripture)
AIG Artificial Intelligence Group
AIG Australian Industry Group
 became the latest company to be thrown a lifeline.

According to the New York Post The New York Post is the 13th-oldest newspaper published in the United States and the oldest to have been published continually as a daily.[3] Since 1976, it has been owned by Australian-born billionaire Rupert Murdoch's News Corporation and is one of the 10 , US banking regulators are actively searching for a candidate to take over the Seattle, Washington-based bank amid fears it could be the next to be felled by the economic maelstrom.

And they have already been in contact with several major financial institutions such as Wells Fargo, JPMorgan Chase and HSBC HSBC Hongkong and Shanghai Banking Corporation
HSBC Humane Society of Broward County (Florida)
HSBC Humane Society of Bay County (Bay County, Michigan) 
, the report said.

Washington Mutual, the country's largest savings and loan savings and loan n. a banking and lending institution, chartered either by a state or the Federal government. Savings and loans only make loans secured by real property from deposits, upon which they pay interest slightly higher than that paid by most banks. , is now seen as one of the firms the most exposed to the current mortgage crisis sweeping the ailing housing sector.

Known as WaMu, it has seen its stocks savaged in a bloodbath blood¬∑bath also blood bath ¬†
Savage, indiscriminate killing; a massacre.

Noun 1. bloodbath - indiscriminate slaughter; "a bloodbath took place when the leaders of the plot surrendered"; "ten days after the
 on US markets in recent weeks, losing some 85 percent of their value this year to plunge to around 2.15 dollars a share.

The west coast bank's total share value is now set at less than four billion dollars.

"The solution is an assisted transaction whereby Washington Mutual is sold to a second party and the FDIC FDIC

See: Federal Deposit Insurance Corporation


See Federal Deposit Insurance Corporation (FDIC).
 covers all losses above a specified level," said Richard Bove, from Ladenburg Thalmann.

He was referring to the Federal Deposit Insurance Corporation Federal Deposit Insurance Corporation (FDIC), an independent U.S. federal executive agency designed to promote public confidence in banks and to provide insurance coverage for bank deposits up to $100,000.  (FDIC) which insures deposits in banks up to 100,000 dollars.

Even as the housing market was spiralling into a crisis, Washington Mutual continued to increase its reserves for bad debt which hiked from 1.53 billion dollars in the fourth quarter of 2007 to 10.3 billion nine months later.

And having written off some 5.9 billion dollars in the second quarter due to the mortgage crisis, it warned of a further depreciation of 4.5 billion dollars in the third quarter.

Anxious clients have already begun to show their concern.

The Financial Times reported Tuesday that deposits have dropped by five billion dollars since June.

It's a sign of panic which could see a rush on the bank as account holders line up to withdraw their money in what could be a catastrophe for the bank.

Bove said Washington Mutual has a huge customer base, with the average account holding some 5,200 dollars.

Like Lehman Brothers, which filed for bankruptcy on Monday, or American International Group
"AIG" redirects here. For other uses, see AIG (disambiguation).

American International Group, Inc. (AIG) (NYSE: AIG; TYO: 8685 ) is a major American insurance corporation based in New York City.
 (AIG), handed an 85-billion dollar bailout by the Fed, WaMu is caught in "a vicious circle A Vicious Circle (1996) is a novel by Amanda Craig which dissects and satirizes contemporary British society. In particular, it describes the world of publishing -- its aspiring young authors, busy agents and opportunist literary critics. ," said Marc Pado from Cantor Fitzgerald.

The same causes are triggering the same results: a fall in share value reduces the value of the bank's assets and thus cuts the value of its collateral when it seeks fresh cash.

"The other side of the equation is who has the liquidity to buy WaMu when everything is such in question?" said Pado.

On Monday, when all eyes were still on AIG as it struggled to stay afloat, ratings agency Standard & Poor's lowered its debt rating for the major West Coast bank to 'BB-' from 'BBB-".

That came a week after Moody's downgraded its debt to non-investment or "junk" status.

To add to its woes, Washington Mutual chief executive Kerry Killinger was forced to step down last week after 18 years at the helm.

Given all these factors, it will be "difficult to find someone to step up to buy WaMu," warned Pado.
Copyright 2008 AFP Global Edition
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Publication:AFP Global Edition
Date:Sep 17, 2008
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Washington Mutual pressured as economic storm intensifies

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