Uh oh it looks like we could see the first casualty of the Congress foot dragging on the Bailout.
This is the left hook from S&P:
Standard & Poor's Ratings Services downgraded Washington Mutual Inc.'s creditworthiness further into junk territory Wednesday, noting the increased likelihood that any sale of the company would only be done in piecemeal fashion.
This is the right hook from Moody's.
WaMu has insisted that its capital levels remain above regulatory standards for being considered "well capitalized," but debt ratings agency Moody's this week cut the financial strength rating of WaMu's main bank subsidiary to "E," its lowest, saying the thrift's capital is insufficient to absorb its mortgage losses.
And this could be the telegraphed punch that might bring them down.
Credit default swaps on WaMu's debt surged to an upfront cost of 54.5 percent the sum insured, or $5.45 million paid upfront to insure $10 million in debt for five years, from 40 percent on Monday evening, according to Markit Intraday. The swaps also require annual payments of 5 percent.
That seems like quite a bit of money to insure $10 million of debt. Also if you look at their balance sheet they have $9 billion in cash and $30 billion in debt so they might not survive too much longer without a buyout, cash infusion, or a Congress bailout. If they were leveraged 26 times or whatever Lehman was then they would already be dead. Hopefully there won't be a bank run like there was an IndyMac so they would have enough time to find a buyer.
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