WaMu deal may wait for details of mortgage bailout

Washington Mutual may have gained a reprieve from being sold or carved up while the federal government tries to figure out how to salvage the crisis gripping the nation's financial system.

The Seattle-based thrift's big portfolio of bad mortgages puts it at center stage in the wide-ranging rescue being formulated in Washington.

"Among FDIC-insured institutions, this is the biggest one for which there are great concerns," said Bert Ely, a bank consultant in Alexandria, Va.

WaMu reportedly went up for sale earlier this week. If regulators at the Federal Deposit Insurance Corp. are pushing it to sell, a deal could be announced as early as this weekend. If the situation is not that dire, WaMu probably will have to wait for details about a mortgage rescue — specifically how many bad loans it might unload — before it can attract a buyer or more capital.

Ely said he was puzzled by Friday's 42 percent climb in WaMu stock. Shares closed up $1.26 at $4.25.

"Market makers were taking a shot in the dark, saying, 'We think all these actions have a net positive for the value of Washington Mutual,' " Ely said.

Wall Street celebrated its hopes for federal intervention by bidding up many bank stocks on Friday, but the mortgage-bailout plan remained sketchy as the administration only outlined it with broad strokes.

Bank analyst Howard Shapiro doubts WaMu will find a buyer without a mortgage-bailout plan.

"When there's clarity about how and when WaMu can dispose of troubled mortgage assets, you'll see suitors start to line up," said Shapiro, who is with Fox-Pitt Kelton Cochran Caronia Waller in New York.

Richard Bove, a bank analyst in Tampa for Ladenburg Thalmann, thinks the government is pushing WaMu to sell and will announce a deal this weekend.

"I think the word has come down from the government that the company must be sold," he said. The government will assist a sale, he predicted, adding that it does not matter whether that money comes from existing FDIC funds or a new bailout plan.

The government was quick to respond to insurer American International Group earlier this week, agreeing to lend $85 billion to save it from filing for bankruptcy protection.

But a mortgage bailout would be more complicated, more expensive and require new legislation.

"People are in total shock and amazement at the scope of this thing and are trying to digest it," Ely said.

In 27 years as a bank consultant, which included giving expert advice during the savings-and-loan crisis, Ely said, "I've never been through times like this where there are uncertainties of such magnitude. There's no way of estimating anything."

Melissa Allison: 206-464-3312

or mallison@seattletimes.com