WAMU in death spiral...

Washingtom Mutuals stock is in a freefall and we could see a run on the bank soon, similar to what happened with InyMac. This bank should be monitored closely today. They are knee-deep in Pay-Option ARMS, mostly in California.

From the MarketTicker:

Those of you who have read The Ticker for a while know that I have been banging on the drum of WaMu for a long time - since last April when I first piled onto them following their 1Q 07 report in which I "noticed" that they were paying dividends out of (in part) Capitalized Interest - which, while "booked" profit, isn't cash.

As I always said in my years in business, its first, foremost, and always the cashflow stupid; all else is a nice distraction.

Now swaps on WaMu (protecting against the risk of default) are being quoted not in basis points but in percent up front; yesterday there were reports that it was being quoted at 40% up front.

To put this in perspective this means you pay $4,000,000 to protect $10,000,000 in corporate bonds initially, plus more every year (for a total of five years.)

Does anyone else think this is a particularly bad price for that insurance? Does anyone else think this is essentially slamming the door on anyone who might want to buy?

To put this in perspective it is similar to what you'd pay for homeowner's insurance (if you could buy it at all) with a Cat 5 hurricane 4 hours from landfall and your home is on the beach and in the direct impact path.

The odds are impact are extremely high, and if you do get hit the odds are near 100% that all you will find when you return is a slab and the water feed pipe to what used to be your house sticking out of the ground.

To read the entire article go here http://market-ticker.denninger.net/archives/577-Ok,-Im-gonna-say-it....-WaMu.html