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WAMU

deejayohdeejayoh
edited December 2007 in The Economy
Closing "WAMU Capital" (MBS arm in NYC) and laying off 100 traders
WAMU CLOSING BROKER
By RODDY BOYD
December 6, 2007 -- The brokerage unit of West Coast banking giant Washington Mutual appears to be on the verge of closing, according to a number of sources on Wall Street.

WaMu Capital Corp., a mortgage-backed securities (MBS) broker with an office in New York, is pulling the plug Dec. 10 on its attempt to be a player in the MBS markets, according to an individual familiar with the firm's plans. The announcement had originally been scheduled for Tuesday, but was shifted to next week due to Hanukkah.

A victim of the sustained collapse in the mortgage markets, WaMu Capital will reduce its headcount to between 10 and 20 people from 125. In September, the bank dismissed 100 traders, sales personnel and support staff.

The closure appears to have been coming for the past few weeks. Since early November, WaMu Capital was not providing repurchase agreements and in many cases, did not provide even basic bids and offers for bonds it had sold, according to hedge fund portfolio managers.

Launched in 2002 with mortgage veteran Tim Maimone at the helm, WaMu Capital was set up to recapture some of the secondary market profits from the billions of dollars worth of mortgages that the parent bank annually originated.

While no real threat to the likes of mortgage bond trading giants Bear Stearns and Lehman Brothers, WaMu Capital made a decent profit trading some of the more complicated MBS it originated to mortgage hedge funds and others.

WaMu Capital's parent has suffered mightily in the wake of the mortgage crisis. In the third quarter, it announced a 72 percent drop in profits and disclosed a $975 million mortgage loan loss provision, $550 million greater than anticipated.

Comments

  • deejayohdeejayoh
    Wait, it looks like it's worse than the last article. Much, much worse...
    WaMu closing home-loan offices, cutting staff
    By The Associated Press

    Washington Mutual, the nation's largest savings and loan, is closing offices and laying off workers in response to problems in the mortgage and credit markets.

    The Seattle company says it's closing 190 of 336 home-loan centers and sales offices. It's closing WaMu Capital, its broker dealer business.

    It's cutting 2,600 home-loan positions — about 22 percent of those workers — plus 550 corporate and other support positions.

    WaMu is discontinuing all subprime mortgages.

    The company says it expects to take a fourth quarter after-tax charge of $1.6 billion, resulting in a net loss for the quarter.
  • deejayohdeejayoh
    wow. The story gets worse with every click....
    Washington Mutual Plans to Raise $2.5 Billion, Cut 3,150 Jobs

    By Elizabeth Hester

    Dec. 10 (Bloomberg) -- Washington Mutual Inc., the largest U.S. savings and loan, plans to raise $2.5 billion and cut about 3,150 jobs as losses from the mortgage market increase.

    The Seattle-based lender will sell convertible stock and close 190 of 336 home loan centers, the bank said in a statement on Business Wire today. It will also cut its quarterly dividend to 15 cents a share from 56 cents.

    That's gonna hurt. 75% cut in the dividend. Anyone want to bet where this thing opens tomorrow? Was up 5% today. So much for the "perfect information" theory of the market.
  • perfectfireperfectfire
    Arrgggh!! And I was going to buy some puts on them tomorrow after the rate cut. I'm always a little too late to the game.
  • SeattleMooseSeattleMoose
    Of course we have all been programmed to believe that our money in these teetering behemoths is "safe" up to 100K.

    But is it really?
    1) We have NEVER experienced anything like this financial tsunami before
    2) Even if they do pay...how many months/years before you actually recoup your money?
    3) Do you get interest if it takes them a year to pay back your money?
    4) Where is the money going to come from if everything is collapsing?
    5) What is to prevent banks/Govt from changing the rules suddenly and saying "too bad"? (for the sake of National Security)
    6) In a country where good has become bad and bad is now good...who can you really trust?

    And just a couple months ago we had several "tweed jacket and pipe" intellectuals explaining how WAMU would not be like "those other banks". Pure BS and whistling past the graveyard. Does everyone finally get it?Nobody is "special" and this bubble will be an "equal opportunity destroyer" of jobs and wealth. :shock:
  • bilirubenbiliruben
    I figure if FDIC goes belly-up, we will have descended into anarchy with civilization as we know it destroyed. In that event, even if you had your dollars, what would you do with them? Burn 'em?

    Hard to get your financial planner to give you good advice on that outcome.

    It's easy to slide into the guns, ammo, bottled water, canned food and a compound in Montana mentality, but I'm going to assume that we can avoid that.
  • rose-colored-coolaidrose-colored-coolaid
    biliruben wrote:
    I figure if FDIC goes belly-up, we will have descended into anarchy with civilization as we know it destroyed. In that event, even if you had your dollars, what would you do with them? Burn 'em?

    Hard to get your financial planner to give you good advice on that outcome.

    It's easy to slide into the guns, ammo, bottled water, canned food and a compound in Montana mentality, but I'm going to assume that we can avoid that.

    I think that's a good point. The FDIC might delay payment so it can collect taxes and then redistribute them, but in that scenario it is still functioning. So yeah, things need to get awfully bad before we hit the point where you never get anything back. Still, in the worst case it could take a long time to get your $100,000 back.
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