Washington Mutual continues to get hammered as doubts about its solvency increase, and its core businesses decline almost as fast as its capital structure.
However, Lehman's announcement this morning was... a non-event at best, and a pathetic play for time at worst. The only real news was the potential sale of some British real estate to Black Rock for an undisclosed discount and the slashing of the dividend. Oh yeah, and Dick Fuld is still firmly in charge.
As we could not find any balance sheet associated with this release, we are still wondering what's really there behind the name and the facade. And even more so, what still lurks off balance sheet in uncharted waters.
The problem is not liquidity even at cheap levels. The problem is that the business model that supported these financial mutants has changed. They are standing their holding their buggy whips waiting for the horses to come back.
Time to adjust to the global economy guys and the new faces moving in. You no longer have the exclusive turf for Mulberry Street.
So, we still see Lehman as the leader in the dead-man-walking marathon, but Washington Mutual is not far behind, and possible pulling even. National City is within sight.
The finish line is a cliff.
WaMu's CDS spreads surge to record high
by Dena Aubin
Wed Sep 10, 2008 11:22am EDT
NEW YORK, Sept 10 (Reuters) - The cost of protecting Washington Mutual's debt with credit default swaps surged to a record high on Wednesday as the lender's shares plunged more than 25 percent.
Five-year credit default swaps on Washington Mutual traded at 40 percent upfront, plus 500 basis points annually, up from 32 percent upfront plus 500 basis points a year on Tuesday, according to data from Phoenix Partners Group. That means it now costs $4 million on an upfront basis plus $500,000 a year to protect $10 million of debt for five years.
WaMu May Lose Suitors on Accounting Rule; Stock Plummets 30%
By Jonathan Keehner and Linda Shen
Bloomberg
Sept. 10 (Bloomberg) -- Washington Mutual Inc. Chief Executive Officer Alan Fishman, who sold the last bank he ran, may not be able to repeat the feat because new accounting rules for devalued loans are driving away buyers. (Why can't he just make them go away? Is Ben still adopting unwanted mongrel debt? Jesse)
At least three potential acquirers ended talks this year to buy either Seattle-based WaMu or Cleveland's National City Corp., according to two bankers involved in the talks. (With that strumpet from KDB? lol - Jesse) A sticking point, they say: a rule change that will force acquirers to compute a target's assets at market prices instead of deriving values from measures including the purchase price. (How inconvenient. How can one cobble deals together without a veneer of fraud? - Jesse)
The Financial Accounting Standards Board's change, effective in December, may delay consolidation in an industry saddled with more than $500 billion in writedowns and credit losses. WaMu shares plunged as much as 30 percent to a 17-year low after slumping 20 percent yesterday. The cost of protecting the lender against default soared to a record. (The rule change is not the problem. The problem is these jokers won't take the hit and the writedowns. They are all waiting to be bailed out based on the Bear Stearns model. What else would you expect? - Jesse)
``The new rule will curtail M&A by making it too expensive,'' said Robert Willens, a former Lehman Brothers Holdings Inc. accounting analyst and executive who teaches at Columbia Business School. ``With loans fetching their greatest discounts since the Great Depression, it sharply reduces the value of a target's assets. That will force an acquirer to raise additional capital in this very difficult environment.'' (See what we mean? These guys don't want any part of free market capitalism. They just want to make deals and lay off the risk on the public or the tourists in the global financial syste, the SWFs - Jesse)
Loan prices may drop by about 30 percent from their valuation at maturity, said Willens, who also runs a tax consulting firm in New York.
Brad Russell, a spokesman for Washington Mutual, declined to comment on potential acquirers and the FASB rule, as did Kelly Wagner Amen at National City.
