WaMu on the Ropes, Tosses Killinger, Files Recovery Plan with OTS

Washington Mutual (WaMu) a constant whisper on the bank failure watch list, has aggressively moved to save itself. Today WaMu announced the ousting of chief executive Kerry K. Killinger and agreed to file a recovery plan with its chief regulator, the Office of Thrift Supervision (OTS).

Playing close to a scenario that Sheila Bair, Chair of the FDIC, has been warning with regular frequency, "more banks will fail."

Following the government seizure of Fannie Mae and Freddie Mac on Sunday, WaMu is attempting to advert of similar fate. With IndyMac, Fannie, and Freddie in conservatorship the US government is full force in the consumer banking business.

Stepping into Killinger's vacancy s Alan Fishman of the Meridian Capital Group, a commercial mortgage broker. Fishman, in his first statement as chief executive announced that WaMu had reached an agreement with the OTS to reduce its risk profile and tighten supervision controls without raising additional capital.

Killinger is credited with poor timing--expanding WaMu into subprime and handing the Seattle-based bank $6.3 billion in losses over the last 3 quarters. Investors responded by sending the share price into a 88% tailspin in the last 12 months.

Killinger is just the latest in the subprime bank executive shake-out. Citigroup, Wachovia, and Merrill Lynch have all ousted chief executives in the past year.

Although statements and experts feel that WaMu has sufficient capital to support ongoing cash needs without raising additional capital and liquidity--time and confidence has been a share punisher.

Early indications to WaMu's stock prices is that these assurances are not a confidence builder, trading at a 13% plus discount.