September 10, 2008 – 4:15 pm

On Monday, regulators swooped down on Washington Mutual and took the bank’s CEO away. Today the bank gave another pint of blood. With the CEO and other insiders out of the way, the Street’s rating cartel was finally able to step in, pretend to do their job and cut WaMu’s credit. Witness:

Credit ratings agency Standard & Poor’s Ratings Services on Tuesday lowered its outlook on Washington Mutual Inc., a day after its chief executive was removed amid a troubled banking environment.

S&P lowered the outlook to “Negative” from “Stable.”

That it was rated stable to begin with is either a bad joke or a crime, depending on how much you’ve lost. Last October, the company’s stock sold for $38. Since then, the full-scale unbridled abandonment of investors has pushed the bank’s shares into the single digits and today it lost another 21 percent on its way to the pink sheets. Thanks for nothing S&P.

Meanwhile today was just more of the same for WaMu:

Acquisition talks have fallen through and the company had its credit rating cut by Standard & Poor’s, the big ratings agency, earlier this week. The cost to insure the company’s debt rose to a record-high, a sign that investors are increasingly nervous about the company’s ability to pay back its loans.

WaMu capitalized on the supercharged profits from aggressive marketing of adjustable rate mortgages during the disastrous credit expansion. Those mortgages began to blow up for WaMu and others last summer, marking the beginning of the credit crisis and of the end of Washington Mutual.

Shares of the Seattle thrift plunged for the third straight day Wednesday, as investors continue to flee the shares of financial firms with big mortgage exposures and a possible need to raise capital. The cost of insuring against a default on WaMu debt surged to a record high in the market for so-called credit default swaps, Reuters reported.

The selloff means that the stock – which had already shed more than three-quarters of their value over the past year as of last Friday – has dropped 42% in Alan Fishman’s three days on the job, setting a new 52-week low.

So now it’s just a waiting game to see who fails first: Lehman Brothers or Washington Mutual.

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