Washington mutual fell to a 17 year low

Due to worries that the largest US savings and loan will not find a buyer or get enough capital to finance mortgage losses, Washington Mutual Inc shares sank 30 percent to a 17-year low.

According to Reuter’s data, the stock closed down 98 cents at $2.32 on the New York Stock Exchange. It fell earlier to $2.30, the lowest since January 1991.

Analysts blame the slump in part to the concern that potential buyers will walk away because of a pending accounting rule that requires they value the assets of targets at market prices.

Part of the blame was Lehman Brothers Holdings Inc, which earlier said it plans to sell its major stake in its asset management nit and reported a $3.93 billion quarterly loss. The shares of Lehman, Wall Street's fourth-largest investment bank, fell 7 percent.

"Lehman failed to find anyone to invest capital. With Washington Mutual potentially needing some in the future, the market is taking the opportunity to punish that company," said Jaime Peters, a banking analyst at Morningstar Inc in Chicago.

Washington Mutual did not immediately return a call seeking comment.

Thrift’s company shakeup

Earlier this year, it raised $7.2 billion from investors, including private equity firm TPG Inc TPG.UL.

This Monday, Kerry Killinger, the company’s longtime chief executive was replaced by Alan Fishman, the former chief of Brooklyn, New York’s Independence Community Bank.

The thrift’s shares have fallen 93 percent last year and said cumulative losses from sub prime mortgages and other home loans could reach $19 billion through 2011.

SHAKE-OUT

Phoenix Partners Group said that it costs $4.3 million up front plus $500,000 annually to protect $10 million of Washington Mutual debt against default for five years.

Tim Backshall, chief analyst of Credit Derivatives Research suggests that Wednesday's level will let investors see an 85 percent chance of default within five years, according to Tim Backshall, chief analyst at Credit Derivatives Research in Walnut Creek, California.

"The market's shaking out who's going to be able to survive over the next year, and this is just part of the shake out," said Mirko Mikelic, portfolio manager for Fifth Third Asset Management in Grand Rapids, Michigan.