WaMu is wounded, badly. The beast may not die, but it is staggering about dazed and confused. Just two days after the $7 billion infusion from a group led by TPG, WaMu is reeling again, its future as uncertain as it was 48 hours and $7 billion ago.
According to Goldman Sachs:
“Our new product-by-product analysis of its mortgage portfolio suggests between $17 billion and $23 billion of embedded losses in WaMu’s current book of business, of which only $3 billion have been absorbed so far,” the Goldman analysts write. “Subsequently, we forecast a $14 billion provision charge in 2008 (up from $8 billion forecast previously).”
The $7 billion was a pint of blood when a gallon is needed.
This is no surprise to us as we wrote long ago that WaMu is sitting high atop a mountain of garbage debt — about $80B of subprime plus Alt-A (at least) as of recent quarter by our count. That likely hasn’t changed much as the bank has no motivation either to sell or write down its bum loans. It will likely prefer the slow bleed method with periodic capital infusions so it can get the best value and bilk its existing shareholders the maximum amount.
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