tag:blogger.com,1999:blog-30643134.post7360361924765902046..comments2023-12-26T01:10:26.319-05:00Comments on Accrued Interest: Well, Killinger, did WaMu survive?Accrued Interesthttp://www.blogger.com/profile/05096191765979971184noreply@blogger.comBlogger17125tag:blogger.com,1999:blog-30643134.post-44965482327231531842008-08-08T07:39:00.000-05:002008-08-08T07:39:00.000-05:00Hello! I like your blog. How do you like financial...Hello! I like your blog. How do you like financial institutions? Do you like that there is such an incredible amount of these companies? On the one hand it is great that you have a choice, but on the other hand it makes you feel lost in this large number of companies. If it is a problem of choice then ask a friend about the experience or go to www.pissedconsumer.com and read the customers’ feedbacks. Consider <A HREF="http://wamu.pissedconsumer.com" REL="nofollow">WAMU</A>, for example.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-30643134.post-20436234307074922612007-12-13T16:53:00.000-05:002007-12-13T16:53:00.000-05:00WaMu filed the prospectus for the preferred. They ...WaMu filed the prospectus for the preferred. They anticipate loss reserves of 1.8B - 2B Q1 '08, _and_ in each subsequent Q in '08. That's 33% of their present cap, even excluding the current Q. The preferred is non-cumulative and let's see how much of the offering sells.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-30643134.post-28300815039254273032007-12-13T13:00:00.000-05:002007-12-13T13:00:00.000-05:00They went out of their way to attract a type of cu...<I>They went out of their way to attract a type of customer who had been "ill-treated" by other financial institutions.</I><BR/><BR/>This all comes as no surprise to me. I started noticing WaMu's popping up in unbelievable locations about three years ago. Spaces that were empty for months/years or new locations that made absolutely no sense -- the corner of Howard and Clark in Chicago comes to mind...or the strip mall next to the Dollar Tree on Broadway. WTF were they thinking?!Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-30643134.post-19618270527870326882007-12-13T12:07:00.000-05:002007-12-13T12:07:00.000-05:00$2.5B was Monday...WaMu upped the offering yesterd...$2.5B was Monday...WaMu upped the offering yesterday to $2.9B, 3M shares. The question is whether OTS, their primary regulator, will let them space their losses over a number of quarters. WaMu will need even more cap to absorb charge-offs, but if they go back to the market too quickly they won't be able to raise it. I think OTS is indeed playing a slow-mo game, just the way FSLIC did in the early eighties.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-30643134.post-50645567537800223832007-12-13T11:21:00.000-05:002007-12-13T11:21:00.000-05:00"I have no particular reason to believe WaMu's por..."I have no particular reason to believe WaMu's portfolio is worse than average"<BR/><BR/>Do you remember Washington Mutual's advertising where they make fun of stodgy, traditional bankers? The ad campaigns where there are twenty-five old, square bankers representing the other guys and a young, hip, colorful guy who understands representing Washington Mutual? They went out of their way to attract a type of customer who had been "ill-treated" by other financial institutions. They wanted customers who were not served by other banks. These customers are bad credit risks.<BR/><BR/>A couple of years ago, Mitsubishi ran a promotion offering no payment for six months, no money down, and no interest for six months on a sporty car. Their ad featured young, attractive, hipsters driving a car listening to techno through dark city streets. None of this mother and her baby "the car is safe" stuff. The end result was that people attracted to Mitsubishi's by the ad were people with bad credit who defaulted after six months. Mitsubishi had huge losses. My thinking is the same is happening to WaMu.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-30643134.post-38396695185601467902007-12-13T10:33:00.000-05:002007-12-13T10:33:00.000-05:00Any comment on AGO/AMBAC news today?Noticed last n...Any comment on AGO/AMBAC news today?<BR/>Noticed last night that AGO is raising 300 mill to "help other insurers.kernelbleeperhttps://www.blogger.com/profile/14690357168158957260noreply@blogger.comtag:blogger.com,1999:blog-30643134.post-56755134621164133132007-12-13T04:04:00.000-05:002007-12-13T04:04:00.000-05:00AI: I just rechecked a couple of figures from prev...AI: I just rechecked a couple of figures from previous WM work. So, there are a lot of banks which have allowances that at minimum double NPA, because they're careful and they set aside a bunch of allowances for rainy days. I can't emphasize enough what that means to me about management. I'm sure you can guess which side of the JPM/WFC/BAC vs. ETFC side of the fence WM sits on in regards to loss allowance provisioning. NPA is now over $5.4B with allowances of $1.8B. I think that's the problem, because those NPAs are growing fast and the allowances set aside for them suck and this is going to be a long ride. So, you're right. Something about the portfolio isn't performing well and not surprisingly, it's primarily the SP channel, but not exclusively. Interestingly, I don't think WM is overly exposed to SP. Which is the real conundrum as to how this will all play out and what eventual loss ratios will be on prime borrowers. No company more typifies to me what a major difference that will mean to the eventual outcome on the company.SurfDoghttps://www.blogger.com/profile/06108659982056473027noreply@blogger.comtag:blogger.com,1999:blog-30643134.post-59609674099053816352007-12-12T22:57:00.000-05:002007-12-12T22:57:00.000-05:00Allow me to pile on...chances are very great that ...Allow me to pile on...chances are very great that their multiple regulators leaned pretty hard on coming up with a legitimate plan to stay well-capitalized given that high losses are likely to be sustained for an extended period of time...sorta like leaving the gun on the table and they (WM Mgmt) are expected to do the honorable thing...that said, the biggest guilty parties are the folks that make up WM's board of directors, where there is a very long history of mediocrity...Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-30643134.post-7160064062894157212007-12-12T15:13:00.000-05:002007-12-12T15:13:00.000-05:00Oswald:You are making my point for me on two front...Oswald:<BR/><BR/>You are making my point for me on two fronts. First, if WaMu's portfolio is performing so well, why do they need to embark on such an extreme capital campaign? Their actions are speaking louder than their words.<BR/><BR/>Second, let's assume that many people have done what you did with your credit cards. You may be able to afford the investment because you may have an above average understanding of finance. But many people may not.Accrued Interesthttps://www.blogger.com/profile/05096191765979971184noreply@blogger.comtag:blogger.com,1999:blog-30643134.post-39529607928759039022007-12-12T15:07:00.000-05:002007-12-12T15:07:00.000-05:00Well, I admit to not being an expert, but let me a...Well, I admit to not being an expert, but let me add a few thoughts - would appreciate insights. <BR/><BR/>I thought WaMu would have problems, but am a bit perplexed by this recent turn. According the their delinquency data from last month: http://investors.wamu.com/Cache/1001138241.PDF?FID=1001138241&O=PDF&T=&D=&IID=102028&Y=<BR/>(risk management presentation from their investor day), their loan performance is the same or better than the category averages. So, unless they were lying, I think that's hard facts to this point in time that their portfolio performance is not yet "toxic". <BR/><BR/>On the Option ARM issue, they show that the loan to value is the same as in the non option portfolio, and with the high FICOs and low interest rates now I would think many of those people would refinance. They also say something about the neg am being capped at the loan balance and not the home value (don't understand it 100%). <BR/><BR/>To the point about stated income loans being so spooky...I can't really be too freaked about it since we're all familiar with those -- they're called credit cards. I personally bought some investment property last year (raw land) and put sixty thousand on three credit cards (which I stated an income on to get high lines). Why not...I have high FICO and paying zero percent over 12 months, beats using my cash or paying the 9% the finance company wanted to charge. <BR/><BR/>Just my perspective.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-30643134.post-18827461525722760792007-12-12T13:58:00.000-05:002007-12-12T13:58:00.000-05:00AI: $4.5 billion in losses for Wamu is not an extr...AI: $4.5 billion in losses for Wamu is not an extreme event, IMO. That's maybe for the mortgage portfolio alone. Did you add in the full loan portfolio (CC and HELOCs) with some nasty numbers too? You also have to remember, they still do have money coming in the door, set aside yearly provisions and have allowances. I had a number of closer to $8 billion as best guess (not my extreme), which is interesting, because that's what they said they are going to raise in provisions for next year. The real problem with WaMu is the huge number of negative amortization loans and the large exposure to CA. If more people get underwater on their loans, I'm just afraid you will get massive defaults. The fact that so many of these are negative amortization and 1/2 of those are actively using it, is a scary harbinger of things to come I think. None of this will be settled out until 2010. I still think most likely scenario is that they make it through, but it's such a hard case (for me anyway). They may only make it through by merger too, which doesn't speak well to how well shareholders will make out. I hadn't seen the latest Tier 1 capital number, but from the last 10-K I figured they could take $8 billion of hits with the new infusion. And that's about it before the regulators visit. <BR/><BR/>btw - why raise capital and pay a dividend you're just shooting right back out the door? I hate that this is Citi's strategy. Just cancel the dividend and say it will be reevaluated on a quarterly basis. This idea that the dividend is sacred is BS to me. Capital ratios are sacred. I actually like WM's actions, because they're taking this seriously, whereas they kind of weren't before (allowances were paltry). I think they should be preparing for war and this is a sign that they are getting ready. If I wasn't afraid that in 2010, you're going to have a bunch of prime borrowers underwater on their negative amortization loans I'd be much more interested. So hard to discount probabilities on that scenario.SurfDoghttps://www.blogger.com/profile/06108659982056473027noreply@blogger.comtag:blogger.com,1999:blog-30643134.post-45378710260689907092007-12-12T12:58:00.000-05:002007-12-12T12:58:00.000-05:00CDS: I meant controlling for the fact that they ha...CDS: I meant controlling for the fact that they have a large "alternative loan" book, I have no reason to believe they are worse than average. Other than their actions speaking louder than their words.<BR/><BR/>And in regards to suffering a decrease in capital... you are speaking of the writedown they just did? I'm assuming? What I was trying to say is that if you thought the writedowns and loss provisions you had in place were adequate, you wouldn't feel the need to raise a boatload of capital all at once.Accrued Interesthttps://www.blogger.com/profile/05096191765979971184noreply@blogger.comtag:blogger.com,1999:blog-30643134.post-2282637307651842002007-12-12T12:44:00.000-05:002007-12-12T12:44:00.000-05:00A few things."Why raise $2.5 billion in convertibl...A few things.<BR/><BR/>"Why raise $2.5 billion in convertible preferreds? Why cut the dividend 75%? Wouldn't you think if they just wanted to be safe, they'd just do a simple $500 million preferred and keep the dividend as is?"<BR/><BR/>Your maths doesn't add up here, keeping the full dividend and only raising 500m would mean they LOSE 0.9bn in capital. As opposed to the 3.9n they are raising.<BR/><BR/><BR/><BR/>"I have no particular reason to believe WaMu's portfolio is worse than average"<BR/><BR/>REALLY?? With over 50% of their prime book as Option Arms, as you state? WaMu probably has one of the WORST books out there I estimate. Check out <A HREF="http://wallstreetexaminer.com/blogs/ducalion/?p=130" REL="nofollow">Washington Mutual and Countrywide: Wiped out?</A>. And I assume you've read about the basically fraudulent accounting of neg-am loans (taking the FULL payment due as earnings upfront even if only the MINIMUM payment was made).<BR/><BR/><BR/><BR/>This bank is finished, unless they can find someone big enough and dumb enough to take them over. Amazing that management can be so blind to miss a coming housing crash and mass mortgage defaults, whilst so many amatuers on the blogosphere saw it from a LONG way off.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-30643134.post-50497537493593155792007-12-12T12:31:00.000-05:002007-12-12T12:31:00.000-05:00Another great post, AI. I think you raise a parti...Another great post, AI. <BR/><BR/>I think you raise a particularly good point with respect to the WaMu credit card portfolio. Providian was always known as a "sub-prime" card operator before being purchased by WaMu. Not the greatest segment to be concentrated in at the moment.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-30643134.post-14256326248240997732007-12-12T12:27:00.000-05:002007-12-12T12:27:00.000-05:00There's an organization that I read about that exa...There's an organization that I read about that examines company financial statements. WaMu and CFC have been at the top of their watchlist for years because of the hokey-pokey that the companies have been doing on their financial statements. Sorry I don't have a link for you.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-30643134.post-72829880238583651742007-12-12T09:08:00.000-05:002007-12-12T09:08:00.000-05:00I am terrified, hard-core, bone-chilling, fight-or...I am terrified, hard-core, bone-chilling, fight-or-flight (flight), terrified.<BR/><BR/>The invisible hand better stop jacking off and get to work right now or we have the end of capitalism.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-30643134.post-90517641733422712892007-12-12T08:43:00.000-05:002007-12-12T08:43:00.000-05:00Good post.Personally I think the entire lot of ban...Good post.<BR/><BR/>Personally I think the entire lot of banks are fools for not eliminating their dividends during this period of severe credit concerns.<BR/><BR/>It will be interesting to follow WaMu and see if they are acting in desperation, or to avoid desperation...Deborahhttps://www.blogger.com/profile/05180123507766228764noreply@blogger.com