Remember Washington Mutual? They're Junk

Lost in the shuffle of the financial meltdown has been Washington Mutual. Last week, the rumours were that JP Morgan was eyeing the thrift rather lustily. However, now that JP Morgan has been tasked by the Fed with saving AIG, it might not have as much time to consider acquiring WaMu. All the better for Jaime Dimon, as WaMu’s stock slide continues and it is now junk according to Standard and Poor’s.

Reuters: Washington Mutual Inc, was downgraded to “junk” status on Monday by Standard & Poor’s amid concern about mortgage losses, causing shares of the largest U.S. savings and loan to slide after-hours following a 27 per cent plunge in regular trading.

The credit rating agency lowered the Seattle-based thrift’s credit rating to “BB-minus,” three notches below investment grade, from “BBB-minus.” It cut its rating on Washington Mutual’s banking unit one notch to “BBB-minus” from “BBB.” S&P’s outlook is “negative,” indicating another cut is possible within two years.

Washington Mutual responded that none of its unsecured debt is subject to ratings-based financial covenants and that it does not expect the downgrade to have a material impact on its borrowings, collateral or margin requirements.

The company sees its capital levels at the end of the quarter significantly above the levels required of “well capitalised” institutions and that it has not changed its outlook for expected credit losses.

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