After being protected for a long time by board cronies, Kerry Killinger has finally been canned as CEO of Washington Mutual. He’ll be replaced by Alan Fishman, current chairman of Meridian Capital Group and former COO of Sovereign Bank. WaMu is expected to lose $19 billion this year on Killinger’s bad mortgage bets.
Fishman will take over a company whose stock has dropped 85% in value this past year with more than $50 billion in adjustable rate mortgage holdings, making it one of the most precarious financial institutions in the world. The stock could easily drop another 85%.
WSJ: Another issue Mr. Fishman will face is the role of private-equity firm TPG (formerly Texas Pacific Group), which led a $7 billion capital infusion into WaMu in April. TPG structured the deal so it wouldn’t have control over WaMu’s business operations. The federal Office of Thrift Supervision gives extra scrutiny to entities that hold controlling stakes in a thrift.
In recent weeks, WaMu has offered unusually high interest rates — a move seen as an urgent bid to shore up deposits. If its share price doesn’t improve, some investors involved with WaMu may be open to a merger or sale in 2009, according to people familiar with the situation.
While some analysts say WaMu needs more capital, one person close to the company said he doesn’t believe a new infusion is necessary and the thrift can remain independent. Potential investors may be reluctant to put money in, having seen the plunge in WaMu shares since the earlier capital raising.
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