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WaMu stock plunges to lowest level since the '80s

September 25, 2008 | 11:18 am

Shares of Washington Mutual Inc. have plummeted today, and this time no one can blame "short sellers."

WaMu was down 46 cents, or 20%, to $1.80 at about 11:10 a.m. PDT. The stock earlier fell as low as $1.51, its cheapest level since the 1980s.

The Seattle thrift giant reportedly has been shopping itself to potential buyers since ousting Kerry Killinger as chief executive Sept. 7.

My colleague E. Scott Reckard reported last week that federal regulators were working to help broker a deal for WaMu, "concerned about the effect a failure could have on the bank insurance fund overseen by the Federal Deposit Insurance Corp."

But as Bloomberg reports today:

WaMu’s options may be dwindling as potential bidders shy away from making an offer because it’s not clear how much the proposed $700-billion U.S. bank rescue package will benefit the lender. WaMu has failed to attract a bid from at least five banks, including JPMorgan Chase & Co., in the week since it put itself up for sale. WaMu next approached Carlyle Group and Blackstone Group LP, two people briefed on the matter said. Those talks are preliminary, and hinge on the government’s role in helping WaMu, which faces an estimated $19 billion in bad loans, the people said, speaking anonymously because the discussions are private.

Credit-rating firms are putting more pressure on WaMu to strike a deal. Standard & Poor’s on Wednesday cut the company’s debt rating for the second time in nine days, to CCC from BB-minus. A rating of CCC means a company has a high likelihood of defaulting on its debt.

WaMu is the nation’s largest thrift, with $182 billion in deposits.

Short sellers have been betting heavily this year on the company’s demise, as noted in this post on Wednesday. But WaMu is one of more than 900 stocks that have been protected from further short selling since Monday, under a temporary ban imposed by the Securities and Exchange Commission.

So the stock today is being driven down by genuine investors who don’t want to take a chance on holding it, even at these pocket-change prices.

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