2009-09-18-The Fat Lady Clears her Throat:

They say it ain’t over until the fat lady sings. Well, she’s clearing her throat.

In order to sort through the disaster that is Wells Fargo’s (quote: WFC) commercial loan portfolio, the bank has hired help from outside experts to pour over the books… and they are shocked with what they are seeing. Not only do the bank’s outstanding commercial loans collectively exceed the property values to which they are attached, but derivative trades leftover from its acquisition of Wachovia are creating another set of problems for the already beleaguered San Francisco-based megabank.

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2009-09-17-Snake Eating Its Own Tail:

So you wonder how Wells Fargo manages two positive quarters in a row during the greatest credit crisis of all time?  It’s easy.  They have a ready-made buyer for any crap they want to sell at any price.  Don’t believe it?

This borrower couldn’t pay and thus stopped doing so.  This should generate a “NOD” (Notice of Default) and ultimately lead to foreclosure, right?  It should result in an impaired asset which might be sold to some other company (at a discount), right?

It got sold all right – right at the “120 day” late point where Wells counts a loan as “defaulted.”

But look at who it got sold to…..

2009-09-14-The Party is Over:

The party is over for at least one ex-Wells Fargo senior vice president, at least for now.

Wells Fargo & Co has fired a senior vice president after investigating reports she held lavish parties at a foreclosed beachfront Malibu house owned by the bank.

The fourth-largest U.S. bank said in a statement on Monday that it had terminated one employee, senior vice president Cheronda Guyton, who it found had violated its policies.

The policy she violated was the one that said don’t get caught. Do you think the bank would have fired her otherwise? No? I didn’t think so.

2009-09-11-Crass:

It’s “dog eat dog” and “to the victors go the spoils” as the winners at Wells Fargo party in the forclosed homes of  Madoff’s victims.

Bernard L. Madoff’s massive fraud stunned some of the wealthy denizens of Malibu Colony, especially when a couple devastated by the scheme surrendered their oceanfront home to Wells Fargo Bank.

But some neighbors say the real shocker came when they saw one of the bank’s top executives spending weekends in the $12-million beach house and hosting eye-catching parties there. What’s more, Wells Fargo spurned offers to show the property to prospective buyers, a real estate agent said.

So Wells Fargo, a bank demed too important to the world wide financial infrastructure to fail, goes on with business as usual. They play, you pay.

2009-09-01-Classless Action:

Wells Fargo is feeling the blow back of angry borrowers in Los Angles County where the bank has been accused of discriminating against minorities. A class action lawsuit has been brought against Wells Fargo and the suit will stand as such.

A lawsuit filed on behalf of minority mortgagors against Wells Fargo ( will proceed as a class action case after a Los Angeles Superior Court judge certified it as such.

The suit alleges Wells Fargo discriminated against as many as 10,000 borrowers in minority communities by charging more for loans than borrowers paid in other parts of Los Angeles County. While Wells Fargo branches in some parts of the county were given access to a software product that allowed loan officers to provide discounts to customers, that same software, and in turn, the discounts, was not available to branches located in minority communities, according to a statement from the office of the law firm representing the class.

2009-05-07-Stress Release:

Wells Fargo reportedly passed the FED’s stress test to see if it was adequately capitalized, but regulators said it needed another $13.7 billion to be adequately capitalized. You have to wonder what kind of test it was when all 19 insolvent banks passed it, some even needing more capital. But that’s the official word. So, if you pay no attention to the $13.7B, Wells Fargo passes its stress test.

2009-01-28 Q3 Earnings:

Wells Fargo laid a $2.5 billion egg in fourth quarter 2008, but the bank would have had $11.2 billion more worth of yolk in its face if it included the Wachovia offer they couldn’t refuse. But the bank did record a huge write-down of Wachovia’s rotten eggs in December. Better sooner than later!

Write-downs for the quarter break down as $37.2B related to Wachovia’s balance on December 31, $473M in other-than-temporary-impairment charges,  $413M in write-downs on mortgages and $294M ripped off by Madoff.

1. Tally for Write-Downs/Charge-Offs: $6.25B +$37.2B + $473M + $413M +$294M = $44.636B
2. Tally for cash raised TARP: = $25B
   
3. Tally for cash raised NON-TARP:=$12.6B [stock sale in Nov]
4. Current level of Level3 Assets at $34.7B [use 10-Q, wait for the 10-K]
   
5. Current level of loan/credit loss reserves at $8.1B for Wells + $13.7B for Wachovia = $21.7B

We now sum all the distresses to get a lower bound Well Fargo’s current Pain Factor: > $103.94 B

2008-12-08 Blowback:

The bailout of Wachovia was disguised as a buyout by Wells Fargo, but that little scam has blowback for the rest of the financial world and offers a new business model/MO for future scams.

2008-10-23 Steel Delivers:

Well, former Treasury Undersecretary and Goldman Sachs alum Robert Steel certainly has proved his worth.  By getting Wells Fargo to buy worthless Wachovia at a premium to Citigroup’s offer, Steel completed his mission, to use his connections and government influence to bring Wachovia a bailout disguised as a buyout.

2008-10-16 Q3 Earnings:

Wells Fargo booked a $1 billion increase in non-performing loans in the third quarter compared to the previous quarter, then cut its loan-loss reserve by $500 million. Magic? Yup, the magic of accounting rules (made to be bent, if not broken, apparently)!

1. Tally for Write-Downs/Charge-Offs: $726.5M +$5.5266B= $6.2565B
2. Tally for cash raised: = $0.0
   
3. Current level of Level III assets at $34.7B [page 65 of 10-Q]
   
4. Current level of loan/credit loss reserves at $ $8.0B

We now sum all the distresses to get a lower bound Well Fargos current Pain Factor = $49.0 B

2008-10-03 The Graduate:

Just like a petulant school girl changing boyfriends every weekend, Wachovia is now pushing Citi out and welcoming Wells Fargo as the new honey du jour.

2008-07-16 Q2 Earnings:

In a first quarter 2008 reporting redux, Wells Fargo came out with all their guns smoking so badly that investors could hardly see a thing. Now they beat estimates again, and if you listen and sniff just long enough, I’ll bet all that sh!t will start to smell like a rose. So far we have Q2 current data for 2.-4., but surprisingly cannot find the exact write-downs number for the quarter.

Post script :see 1. no writedowns for the 2nd quarter, see 1.

1. Tally for Write-Downs/Charge-Offs: $2.9 B +0 $? = (That provision included total charge-offs of $1.5 billion)
2. Tally for cash raised: = $0.0
   
3. Current level of Level III assets at $23.0 B
   
4. Current level of loan/credit loss reserves at $7.52 B

We now sum all the distresses to get a lower bound Well Fargos current Pain Factor > $27.4 B

2008-06-21 Mickey Mouse Assets:

Wells Fargo said that 4% of total assets were valued by level 3 accounting methods. In other words, by no method at all. From the first-quarter 2008 10Q:

We use fair value measurements to record fair value adjustments to certain financial instruments and determine fair value disclosures. (See our 2007 Form 10-K for the complete critical accounting policy related to fair value of financial instruments.)
Approximately 23% of total assets ($136.7 billion) at March 31, 2008, and 22% of total assets
($123.8 billion) at December 31, 2007, consisted of financial instruments recorded at fair value
on a recurring basis. At March 31, 2008, approximately 83% of these financial instruments used
valuation methodologies involving market-based or market-derived information, collectively
Level 1 and 2 measurements, to measure fair value. The remaining 17% of these financial
instruments (4% of total assets) were measured using model-based techniques, or Level 3 measurements. Substantially all of our financial assets valued using Level 3 measurements consisted of MSRs or investments in asset-backed securities collateralized by auto leases. In first quarter 2008, $1.1 billion of mortgages held for sale were transferred into Level 3 from Level 2 due to reduced levels of market liquidity for certain residential mortgage loans. Approximately 1% of total liabilities ($6.2 billion) at March 31, 2008, and 0.5% ($2.6 billion) at December 31, 2007, consisted of financial instruments recorded at fair value on a recurring basis.
Liabilities valued using Level 3 measurements were $408 million at March 31, 2008.

2008-06-11 It Stinks:

Reggie Middleton has put out a good analysis of Wells, with a price target of about $16 — roughly 38% below the current price. A great in-depth read extending and adding to our points below.

2008-04-16 Q1 Earnings:
The financial media reported Wells Fargo’s fiscal first quarter earnings today to the favorite old familiar tune of “they beat estimates.” But the spin could not confuse the clear, unmistakable implication that the easy money corner has been turned and the future is grim. And don’t be confused by the fact that the bank still turned a profit — even an investor jumping from a window is above the ground until he hits it. Some of the particulars include:

Net charge-offs, the cost of bad loans that won’t be fully repaid, jumped to $1.53 billion from $1.21 billion in the fourth quarter. Charge-offs for consumer loans, which include credit cards, home-equity lending and automobile financing, rose 26 percent to $1.21 billion.

It is the $1.5B in write-offs that we write down, to bring the bank’s running total from $1.4B to $2.9B.

2008-04-08:

New Liquidity Drains Threaten Bank Lending

To be considered a “well-capitalized bank” by U.S. regulators, an institution can’t have more than 10 times its capital in risk-weighted assets. More than 99 percent of American banks qualify as well capitalized. But bond downgrades are going to throw a monkey wrench into that machine and threaten to bring it to a grinding halt.

2008-02-19 Hype, Hope, Hurrah!:

Several (very vocal) bullish opinions on Wells have surfaced in the past week. Most notably, Barron’s expects at least 15% upside from here (about $30 today), and Buffett has apparently increased Berkshire Hathaway’s stake to 9.4%.

These calls all appear to be based on the dubious thesis that Wells has “escaped the subprime mess.” While that might be technically true (so far), we find it to be of little comfort given that it is now beyond painfully obvious that the problems in the mortgage market and credit markets extend far beyond subprime. As we covered in our earlier analysis (below), Wells sits on vast holdings (about $141B) of questionable sorts of loans, including $24B or so of subprime, second-lien and Alt-A loans. Approximately 1/3 of its overall exposure is in California.

Indeed, Wells has only taken a $1.4B write-down on a $12B sub-portfolio of third-party second-lien loans. There may be billions more in write-downs lurking in that pile alone.

Some of us here at BankImplode.com are short Wells, and we can’t figure how these bullish calls are anything more than self-delusion. If this indeed produces a rally (as any actual or rumored move of Buffett tends to do), we suspect it will be of the “sucker’s” variety.

Wells (and its proponents) seem to be gambling that much of the mortgage market collapse is due to exotic financial vehicles, rather than to a genuine decline in ability-to-pay. Thus, the logic would presumably go, if Wells holds most of its exposure in its own long-term investment portfolio, it won’t be impacted by faltering intermediaries and a collapsing secondary market, and the crisis will blow over. But the root problem is in inability to pay; Wells’ delinquencies are rising along with everyone else’s, and mortgage securities are therefore unlikely to ever come back all the way in value. Ever. So they can run, but they can’t hide. The result (we predict) will be write-downs and earnings disappointments for years to come.

2008-02-04 Initial Writeup:

Wells Fargo, the fifth-largest US bank by assets, and the second-largest mortgage lender, has begun to feel the heat of the economic slowdown and the credit crunch in the fourth quarter 2007. As of yet, it has taken (we think) only a $1.4B charge against a special liquidation portfolio (see below for details). But most of the impact to date has been in general charge-offs and increases in loan loss reserves (which have tripled). Despite these issues, the bank still returned a profit in the latest quarter (though it fell sharply; by 38%).

If that were the end of the story, Wells would be sitting pretty. Unfortunately for them, the closet contains more skeletons. Friedman Billings noticed this, and downgraded the bank, writing:

Wells Fargo has $141 billion in residential real-estate loans, with about a third of that located in California, Friedman wrote in a note to clients. The firm cited a report from Downey Financial which suggested that its non-performing assets rose 150% during the fourth quarter, and 35% in December, when compared with November.

“We believe that Wells Fargo is not immune to industry weakness,” FBR wrote.

We don’t think they’re immune either, especially when major projections are now putting price declines in California in the 30-50% range. Further, the bank retains approximately $24B in subprime loans, according to late-2007 Deutsche Bank data.

While banks such as UBS, Citigroup, and Morgan Stanley may be in the eye of the storm (or further), Wells has just barely begun to feel the first sprinkles.

In fact, Wells has recognized the looming issues and is attempting to front-run the problems by carving out some of the worst junk in its portfolio for liquidation. MortgageDaily reported back in November 2007 that the bank has started by moving $11.9B of third-party-originated second-lien (home equity) loans into a separate bundle, on which it planned to take (has taken?) a $1.4B charge.

We see two problems with this strategy. The first is the assumption that the losses on these assets will only be around 10%. From what we’ve seen, these sorts of assets may fetch bids as low as ten cents on the dollar in today’s paranoid fixed income markets. But the paranoia is somewhat justified: against falling values, second liens are essentially worthless in a huge fraction of cases (especially recent vintage, which characterizes this special Wells portfolio). In other words, if you wanted to go with more of a “mark to market” impairment on this portfolio, the write-down would need to be more like $8.3-10.7B.

The second problem is the assumption that the rest of Wells’ $141B hoard is pristine. But just because Wells originated these, doesn’t mean their underwriting was that much better (see below), or that borrowers aren’t facing tough circumstances as we enter a recession (with unemployment already rising), or that collateral values falling don’t hurt everyone. So there will be write-downs (and/or markedly higher loan loss reserves) on the other $130B or so of loans. Mark our words.

Finally, the bank has the dubious honor of being the only lender sued by the city of Baltimore for reverse red-lining. And it is also a defendant in a similar suit by the city of Cleveland, along with 20 other banks and lenders.

Should these municipalities win anything back, they will likely inspire countless imitators across the country, manifesting as significant “litigation impairments” on Wells’ balance sheet for years to come. But you won’t find this kind of risk accounted for in the current financials.

Sun Trust has passed the FED’s stress test to see if it was adequately capitalized, but regulators said it needed $2.2 billion to be adequately capitalized. You have to wonder what kind of test it was when all 19 insolvent banks passed it, some even needing more capital. So, if you pay no attention to the $2.2 billion, SunTrust passes it’s stress test.

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2008-07-22:

SunTrust’s profits are improving following a 22 percent decline in the first quarter 2008. They only fell 21 percent in the second quarter. Let’s cheer for them:

SunTrust Banks‘ profit fell 21 percent in the second quarter due to high credit costs, even after it sold a big stake in the Coca-Cola Co.

The Atlanta-based bank holding company had net income of $535.3 million and earnings of $1.53 a share, compared with net income of $673.9 million and earnings of $1.89 a share in the second quarter of 2007. Second quarter revenue rose 2.6 percent, to $2.6 billion.

In what could be deemed a cash raising-event, the bank sold 10M shares of Coke stock and wrote down to zero or had charge-offs of $323M. According to the bank’s 1Q 2008 10Q, Sun Trust has just shy of $48M of Level 3 waste on its balance sheet along with a healthy $343.3M increase in loan loss reserves, $448 M from $104.7 million in the second quarter of 2007. There was no capital raised other than the stock sale. Don’t worry, that goes straight to the tally.

1. Tally for Write-Downs/Charge-Offs: $718.7M + $323M = $1.41B
2. Tally for cash raised: $0.0
3. Current level of Level III assets at $47.966M
   
4. Current level of loan loss reserves at $448M

We now total all the distresses to get Sun Trust’s current Misery Index of $1.967B

HOORRRAHHH!!!

2008-04-22:

The credit crunch caught up to SunTrust in last year’s second quarter; since then, the bank has reported three quarterly profit declines. So, without skipping a beat, SunTrust wrote down another $163.7M for first quarter 2008:

SunTrust also had $163.7 million in net valuation losses during the first quarter, mostly from mark-to-market valuation adjustments on trading assets and loan warehouses, and certain asset-backed securities classified as available for sale.

With the value of of residential real estate eroding from underneath itself, the bank increased its loan loss provisions:

SunTrust set aside $560 million for credit losses, up. Net charge-offs nearly quintupled to $297.2 million,

Then the bank beefed up its ability to take a punch by ratcheting up its Tier-1 capital ratio, which measures its ability to cover losses:

… rose to 7.25 percent from the fourth quarter’s 6.93 percent, but remains below its 7.50 percent target. Regulators say 6 percent reflects a “well-capitalized” bank.

We recorded $555M in write-downs and distresses for them in all of 2007. For first quarter 2008 we add

• Write-downs of $163.7M
• Net charge-offs of $297.2M
• Loan loss provisions of $560M

This brings the write-down total to $718.7M and the total including all new distress to $718.7M + $297.2M + $560M = $1.5B

2008-04-13:

SunTrust wrote down an additional $555M in its fiscal fourth quarter, brining full year 2007 write-downs to $777M. Most of the fourth quarter write-downs were actually accounted for in the third quarter, but as the credit crunch set in and asset values crumbled, the money gap widened. So, in the fourth quarter, Sun Trust more than doubled its write-downs and related funding.

According to the bank’s fourth quarter presentation, the write-downs are due to an off-balance sheet, multi-seller asset-backed commercial paper (ABCP) program established in 1999: “Three Pillars” ($145M), “Affiliated Mutual Fund” ($250M) and a Private Placement ($116M), plus a few odds and ends.

2008-01-31:

SunTrust wrote down a tiny $13M related to subprime loans in the second quarter of 2007, seeming to get away fairly unscathed. However, in the third quarter this figure jumped to $209M. While still small compared to the hits mega-banks have been taking, the sum is relatively large for mid-sized SunTrust (whose annual net income in 2006 was just over $2B).

Deutsche Bank estimates that SunTrust has another $1.7B in direct subprime lending exposure that has not been written down (Jan 2008 figures).

stories: bizjournals.com, reuters.com

We recently heard Houston-based Franklin Bank shut down wholesale lending operations, but now the entire company appears to be teetering on the brink of failure.

According to Reuters, CEO Anthony Nocella “will accelerate his personal plans to retire” and has stepped down, and the bank’s holding company faces an SEC probe that “comes on the heels of a 10-week internal investigation that the bank said uncovered a variety of accounting errors, largely related to residential mortgage loans.”

This in from a tipster:

“I heard from one insider that they are not announcing that they have closed down wholesale because they don’t want it posted on the implode-o-meter website. The reasons they are so against this is because of their already low common stock price. Today it is up about $.14 to $1.56! They are in jeopardy of being de-listed by NASDAQ and they feel their stock would further plummet if listed on the implode-o-meter. Furthermore… a higher up in the operations made the decision to buy a bulk of loans a few months ago that have almost all gone bad. They opened a separate division who’s focus is to get these loans refinanced off the books.

They had about 650 employees and with wholesale gone they are down to about 500. They would typically fund anywhere from $30 million – $60 million in good times. Now that wholesale is out of the picture they are really not funding anything.”

From a page on their web site about Retail Mortgage Loan Production Offices: “In just over three years, Franklin Bank has grown total assets to over $4 billion and has over 600 employees in 60 locations in 34 states.” Allmortgagedetail.com reports average monthly origination volume across all channels in 2006 was $53.8 million, a drop from 2005’s average of $67.2 million.

Franklin had 38 retail mortgage banking offices per their 2006-12-31 Annual Report. Twelve offices were closed in the quarter ending 2007-09-30 according to their 2007-12-20 10Q filing:

“Non-interest expense for the three and nine months ended September 30, 2007 increased $332,000, or 6%, and decreased $672,000, or 4%, respectively, compared to the same periods in 2006. The increase for the three months ended September 30, 2007 primarily related to charges associated with closing twelve retail mortgage offices during the third quarter as well as an increase in real estate owned expenses due to an increase in the number of foreclosed real estate properties. The decrease for the nine months ended September 30, 2007 was primarily due to decreases in salaries and benefits and loan expenses partly offset by an increase in real estate owned expenses. Salaries and benefits decreased $1.3 million, or 13%. This decrease was primarily the result of lower commissions due to the volume of originations. Loan expenses decreased $573,000, or 34%. This decrease was primarily due to the lower volume of originations. The increase in real estate owned expenses was due to an increase in the number of foreclosed real estate properties.”

“Franklin’s single family portfolio is also geographically diversified over 49 states.” On closer look, it seems a full-third is in hard-set California, with the balance of more than half in Texas and Florida. From their latest Earnings Release dated 2007-12-31:

The largest concentration of this portfolio is in California and Texas. The following table is the geographic location of the single family mortgage loan portfolio for states that exceed 3% of the total portfolio as of December 31, 2007 (in thousands):

State	Amount	%
California	$598,369	33 %
Texas	243,929	13 %
Florida	137,445	7 %
New York	75,721	4 %
Virginia	64.480	4 %
Massachusetts	64,360	4 %
Maryland	55,850	3 %
New Jersey	54,112	3 %
Illinois	50,038	3 %
Washington	46,582	3 %
Other	444,407	23 %
Total	$1,835,292

The Houston Business Chronicle reports Franklin “will appear before the NASDAQ listing qualifications panel May 22 [today] to argue for continued listing of its shares, pending the filing of outstanding financial statements.”

Stay tuned for updates. You can view our Discussion Forum for additional info. Please contact us should you have any details to add.

At the end of February, around 200 of Seattle-based Washington Mutual’s (WM) best performing retail loan consultants, their guests, and top company brass set off for four days of sun, snorkeling, and gambling at Atlantis Paradise Island resort in the Bahamas.

This was one of many such incentive trips over the years the retail banking and mortgage company had bankrolled for the top 10% of its commission-driven mortgage team.

It just gave a false sense of security, as by May most would be without a job.

For those salespeople who had been with the company during the real estate boom of the past few years, it was only the latest of many such trips. For first-time invitees it was a trip they had worked hard to earn. But for all of them, though they didn’t know it then, it would be their last.

Like many victims of the mortgage collapse, most of the loan officers, especially those who were in the Bahamas, feel burned.

So, the bank continued to burnish the thin veneer of its glossy outside to a high brilliant luster, while corrupt and corroding from within it was collapsing.

As the subprime crisis worsened and the numbers of defaults increased, WaMu saw its share price drop 70%, from a high of 44.66 on May 24, 2007. Like most other mortgage lenders, it was hemorrhaging money. Since April, 2007, it had lost 74% of its market value. At its first-quarter earnings call Apr. 15, the company announced it had lost $1.1 billion during the quarter and also needed to set aside $3.5 billion to cover loan losses in the quarter.

For staff who had been in the Bahamas, the news was particularly hard to fathom. They were, after all, members of the elite President’s Club, top earners who were able to generate annual revenues of $40 million to $200 million.

Hard to fathom? At first perhaps, but for share holders who depend on share price not snorkeling trips for dinner, that 74% cliff dive hit them right between the eyes. Betrayed, befuddled, searching for answers investors found only lies and corruption.

Washington Mutual Inc. (WM) failed to foresee the speed and severity of the decline in U.S. house prices as the housing-market meltdown rocked the giant thrift, its president and operating chief said Wednesday.

Steve Rotella also told the UBS 2008 Global Financial Services Conference in New York that “2008 will be a very challenging year for earnings,”

Yea Steve, we all saw it. Banks earn profits by lending, profits drive stock options into the money, officers and board members therefore make money based on share price. Now riddle me Steve this: if the insiders sell the corporate soul to the devil, and get out before there is hell to pay do they keep everything? Just asking, because Mary E. Pugh, chair of the bank’s finance committee, has stepped down along with board member Anne Farrell. The banks claims Farrell left, due to the company’s mandatory retirement age. Sure, sure, but the stench gets even more foul.

WaMu CEO Kerry Killinger also announced changes to the controversial executive compensation plan. The plan originally included a rather shady way of calculating bonuses, ignoring some of the credit losses that have clobbered shareholders (and cost former employees their jobs) when determining compensation for top executives.

All the time Steve what did you think of the risk rotten loans?

The investor said President and Chief Operating Officer Stephen Rotella endorsed “risky” loans including adjustable- rate mortgages.

On last quick question Steve, if you were so clueless on the housing crash why were you so busy preparing for it?

Nonetheless, WaMu has secured about $50 billion in “highly reliable excess liquidity,” Rotella said, leaving the bank free from relying on capital markets for commercial paper or unsecured debt. Like others, as WaMu lessens exposure to housing and mortgage risks, it has focused on retail-banking operations to drive revenue growth.

Investor pride is as powerful as the human psyche is fragile, first it denies everything, then admits faults and failings only grudgingly, but finally in the end it can accept fault undeservedly and underestimate its own very best capabilities. Eventually against your most difficult resistance and cognitive dissidence the certainty that you were sold out sets in then as easily as seasons change hurt turns to outrage and outrage seeks to vent.

A WaMu employee stepped to the microphone at last Tuesday’s shareholder meeting and unleashed a fierce attack on the bank’s leaders, particularly President Steve Rotella.

The public rebuke was stunning — and its private aftermath is equally unexpected.

The 2,000-plus shareholders and employees heard Tom Golon, a loan consultant for 10 years in WaMu’s downtown Seattle home-lending center, declare that “this man has driven the company to the edge of bankruptcy, and he should be fired, and his bonuses should be taken back from him.”

Golon, who is among the approximately 3,000 employees losing their jobs at month’s end, called Rotella “the man most responsible for the demise of WaMu,” adding that he was “kicked out of (JP Morgan) Chase four years ago and came over to WaMu to do his damage.”

He did it, they did it! The decimation of share prices, first quarter loss of $1.14 billion vs a profit in Q1 of 2007 in addition to $9.1 billion taken in write downs and credit losses with billions more admittedly on the way, bulking up loan loss reserves by $3.51 billion (set aside) two dividend cuts a forced dilutive sale of shares in excess of $7 billion and another $50 billion in various other forms of liquidity all in preparation for a shi# storm for the ages in the global housing market rattled economy.

WaMu has long been a dangerously wounded beast investors have been undeniably better served to avoid. For its part current management probably does not want to finish the beast, they will bleed it to within a centimeter of its life, then bleed it a little more, not kill it, you can’t beat blood out of a dead WaMu. Whether it lives or dies the alternatives are bleak.

If by some miracle Stephen Rotellas retail banking and liquidity processing can save WaMu, it will still be at a steep cost. Nothing comes free in the post credit burst. Raised capital will bang up current investors in dilution and only further burden the already over laden share price. Newly invested capital is put at instant extreme risk as with Enron and Bear Stearns. Or the bank could be left to fail turning current investment into certain loss, but alleviating further risk factors for current and would be future investors. The stark alternatives now force an impossible decision on all participants, which is worse, death or salvation.

The retail investors who have sunk large parts of their life earnings into its shares will not easily let go, and management who prefer to bleed the beast forever probably will. So, for WaMu only death can stop the bleeding, bleeding from wounds that will never heal.