Washington Mutual:Run on the bank coming?
I am not saying this cannot happen but in trouble times like this, given WaMu;s problems it is very possible. If you have burst the FDIC limits or have an employer or relative’s employer making use of WaMu, its time to take a closer look and minimize your risk.Interestingly, WaMu’s credit condition now is rising to a level that have exceeded Bear Stearns before the rescue came along.
Washington Mutual Inc. tumbled for a second day in New York trading after Gimme Credit LLC said unsecured creditors were “pulling funds” from the biggest U.S. savings and loan. Washington Mutual disputed the report.
Gimme Credit analyst Kathleen Shanley cited a decline in federal funds purchased and commercial paper to $75 million from $2 billion at year-end, which Washington Mutual reported this week in its second-quarter results. Securities sold under agreements to repurchase dropped to $214 million from $4.1 billion at the end of 2007, she wrote.
Washington Mutual, known as WaMu, reported a $3.3 billion second-quarter loss on July 23. Rising delinquencies forced the Seattle-based company to boost provisions for bad loans. While WaMu said it has enough capital after raising more than $7 billion earlier this year, Shanley said liquidity remains a concern.
“We won’t use the phrase ‘run on the bank,’ but we would be remiss if we did not observe that many creditors have quietly been pulling funds,” wrote Shanley, based in Chicago. Their actions are “presenting an increasing funding challenge,” she wrote. Gimme Credit is an independent research firm serving corporate bond investors.
AJ Writes: “Someone thinks WM is going under. 35,000 Aug. put contracts traded at the 3 strike today, and 12,000 Sept. PUT contracts at the same strike. Both dwarfed open interest, so they’re mostly new positions. This reminds me of activity in Bear Stearns in March.”
Here is a dynamic table of options on WaMu.
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