After WaMu, sellers slam Wachovia, FirstFed and Downey

After the failure of Washington Mutual on Thursday, Wall Street today is back to bashing the usual suspects as the next potential casualties: Wachovia Corp., National City Corp., FirstFed Financial Corp. and Downey Financial Corp.

But there’s no blaming short sellers for what’s happening to these stocks this time around. Remember, starting last Monday the Securities and Exchange Commission outlawed short selling in more than 800 financial issues, including all four of the above.

Wachovia shares were down $4.67, or 34%, to $9.03 at about 11:15 a.m. PDT -- below the previous multiyear low of $9.08 the stock reached on July 15, amid the worst of the mid-summer selling in financial issues.

So if the short sellers can’t pound these stocks, the selling today must be by investors who were expecting the shares to rise -- and now have changed their minds, big time.

Rationally, if you expect Congress to pass the Bush administration’s $700-billion bailout plan for the financial system, you might also expect that the banks most burdened with bad mortgages -- including Wachovia, National City, FirstFed and Downey -- would stand to be potential beneficiaries of the program.

"But this is a very emotional market, and when people are emotional they aren’t rational," said Todd Clark, director of trading at Nollenberger Capital Partners in San Francisco.

There’s also a common thread here with Wachovia, FirstFed and Downey: All three have huge, troubled portfolios of pay-option adjustable-rate mortgages, which allow borrowers to pay so little that their loan balances can rise. Option ARMs also were a favorite loan at WaMu.

FirstFed was down $5.34, or 29%, to $12.91 at about 11:15; Downey was down $1.48, or 38%, to $2.42.

National City was off $1.48, or 30%, to $3.51.

Comments

[martscan]

I take strong, no, diametrically opposite, exception to Todd Clark of Nollenberger Cap Ptns and his statement that emotional people act irrationally. Emotional, but smart, rational investors with tons of dough at stake enter GMO orders when its obvious a long position stinks. GMO = 'get me out'.

[Roger Ramjet]

Greedy banks, Yea, Greedy banks,
Amazing, I just tried to open an acccount with Charles Schwab and they wanted Equilfax into the deal. I needed to be approved, even though I wired $5000.00 It is amazing that I have to "show ID" for cash! Gee Whizz, perhaps next time I go to Ralphs they are going to ask for my ID when I present cash!...........................

[pcfriz]

It's amazing. These men who have dragged America from the richest country in the world to the largest debitor in one generation now want the citizens to pony up $700 Billion more in relief to the gazillionaires who got us here is just amazing. The Czar would drag them outside and shoot them dead and leave them in the snow. Many more need to be in the snow too.

[HyperGirl]

I know WaMu stockholders have lost everything with the WaMu collapse, but what about WaMu shortsellers who got in before the deadline? If a company collapses and regular shareholders are stiffed, are the shorties stiffed, too?

[JohnMichael%20Covas]

A better solution to the current financial crisis, although ti would not be a total solution, would be to permit debtors in chapter 7s who are upside down in their home loans to "cram down" the obligation on the residential real property to the actual fair market value of the real estate that secures the obligation. This is permitted n the chapter 11 cases and should be the rule across the board in all cases filed in the bankruptcy court. This would allow more homeowners to continue to participate in the American Dream. Creating a fund to soften the blow on the lenders would be a better use of tax payer money and would certainly be more equitable to the homeowners and allow the financial markets to 'suffer' a little bit.

[Bill]

Banks and stockbrokers remind me of other professions, such as lawyers and tax consultants. They will be delighted to help you, for a fat fee of course, RIGHT AFTER THEY HELP THEMSELVES ! The current initiative to bail out Vegas-on-the Hudson is obscene, anyone who votes for that fiasco should be voted out of office pronto.

[DB]

Here we are bailing out banks that are making a lot of money by lending our money. The banks made bad decisions on whom to loan money and then lost the money. These people did not have the means to pay back the loans, and the banks knew it. We also have people buying homes that they cannot afford because they think they DESERVE to have them. Just ask them if you think they don’t. They will tell you! They don’t care if they can afford them, again they DESERVE them. Taxpayers are spending money to bail out people that made bad financial decisions. What has happened to buying a home to live in and not having it as an investment that “we can roll over and make a killing?” When is money going to be given to the people that did, and do things right, and are not placing their money burdens on others because they “deserve it”! With this attitude, we can all go to Vegas and bet to win, and if we loose, get all our money back, and then some,( we did something stupid), because we DESERVE IT!

[ate mely]

to Roger Ramjet...
Any cash over 2-3k wired to open an account in any financial institution or hand out to Ralph (if his a license financial institution) requires a federal id, a requirement of '02 Patriot Act not of greed - fyi

[Dan Urgo]

WHERE ARE THE JAIL SENTENCES???