Washington Mutual Bank Cutting Jobs Amid Big Losses: Another Bad Economic Sign
April 8th, 2008 by JOE GANDELMAN, Editor-In-Chief
Yet another bad sign of the times on the economic front: Washington Mutual has lost $1 billion in the first quarter and the bank is going to slash 3,000 jobs nationwide:
Seattle-based WaMu (NYSE: WM), the nation’s largest thrift, has been hit hard by the mortgage turmoil, leading to speculation that its days as an independent financial institution are numbered.
A company spokeswoman said Tuesday that the majority of layoffs will be in its home loan operations, including sales and underwriting staff. She said some layoffs could occur in Texas but said regional numbers for affected employees were not yet available.
WaMu also said it was closing its 186 remaining freestanding home loan offices and exiting wholesale lending by the end of June. The bank instead will focus its mortgage business at its retail bank branches and expand its call center operations.
Could it be that the bank could eventually be up for sale? The Wall Street Journal:
The $7 billion investment in Washington Mutual today probably isn’t the end of the line for the bank: analysts and other people familiar with the bank see a sale in the company’s future.
In fact, WaMu embarked on a capital infusion in part to buy time to get the bank back on its feet. While the deal involves a lot of dilution for current shareholders–the $7 billion capital raising totals 63% of WaMu’s $11 billion market capitalization–it was the only option that enabled WaMu to raise enough capital to get back to health and satisfy ratings agencies. WaMu already had raised money by offering hybrid securities, such as convertible preferred shares valued at $3.7 billion last year, but now had to raise capital through common equity, both to meet regulatory requirements for the necessary capital ratios and to boost its tangible common equity, a measure closely watched by ratings providers.
The dilution may be harsh for shareholders in the short term, but it might be worse if WaMu had to run its business without more capital to set off loan-loss provisions and other losses. “The capital being brought in now enables them to get to a return to profitability or a sale, which is why the dilution is justified,” one person close to the WaMu offering told Deal Journal.
Every day — on the local, regional and nation level — there seems to be some new story of a person or company in trouble due to the economy. This is but the latest one.
Meanwhile, President George Bush still won’t use the “r word” and insists the economy will rebound:
President Bush urged Congress on Monday to resist efforts by Democrats to pass a second economic stimulus package, saying that while the economy is “in a rough time right now,” he is confident it will begin to rebound by the end of the year.
From an economic standpoint, things look they’ll likely to get worse before they get better. From a political standpoint, things look like they’ll get worse for the Republicans before they get better.
This entry was posted on Tuesday, April 8th, 2008 at 5:38 pm and is filed under Elections, Bush Administration, Wall Street, Consumerism, Corporations, George W. Bush, Politics, Economy, Society, Business. Both comments and pings are currently closed.
