Clock Ticking On WaMu Sale or Bailout

WaMu is poised to be sold. Now, all it needs is a buyer.

A major private equity investor in Washington Mutual has agreed to conditions that clear the way for a possible sale. Unfortunately, the Seattle-based Washington Mutual may be so severely damaged that no suitor will want the place.

On the heels of the federal government's $85 billion bailout of insurer AIG, WaMu returns to center stage as a financial institution in need of a rescue. Federal regulators are reportedly asking other banks, including JP Morgan Chase, Wells Fargo and HSBC, if they would look at taking over WaMu. Earlier this year, JP Morgan Chase CEO Jamie Dimon was interested in buying WaMu.

Once a high-flying mortgage lender, WaMu is now running out of time and money as it staggers under the weigh of a money-losing subprime mortgage portfolio. WaMu's stock price is below $2 per share and Standard & Poor's just downgraded the company's credit rating to junk bond status.

Federal regulators would be greatly relieved should a White Knight emerge, even if the government were required to help fund the purchase. That's because there's growing concern that if WaMu falls, the Federal Deposit Insurance Corp. could go bust making good on the lender's estimated $180 billion in customer deposits.
Right now, WaMu is the biggest bank failure on the near horizon. But others are sure to follow -- even the FDIC has concedes that possibility.

How many more go bust is anyone's guess.

Among those expecting a bloodbath is billionaire investor Wilbur Ross, who specializes in buying and turning around troubled industry assets. Ross said the U.S. could see up to 1,000 banks close or merge.

Sheila Barr, head of the FDIC, asserts the depositor insurance fund will meet all its expected obligations.