What's up with WaMu?

A good question. Earlier today the American Banker reported that the nation's largest S&L was in advanced talks with JPMorgan (you might recall that the investment bank had been rebuffed sometime back). But CNBC's Charlie Gasparino, citing his own sources, says JPMorgan will not make a bid until either WaMu's stock stops falling or the government takes over. Shares fell 3.5 percent, to $2.73, after a brief run-up on the American Banker news. CNBC also reports that other banks are also interested in Washington Mutual. On Thursday night, WaMu took the unusual step of releasing third-quarter projections that show it had enough capital and liquidity to get through the current downturn. It also said that its Tier I capital ratio was 7.76 percent, well above the regulatory minimum of 6 percent. The next big question, of course, is whether deposits hold up. So far, so good. From the WSJ:

To get through this period, WaMu must keep and attract deposits so it has enough liquidity to cover its obligations. On that front, WaMu has been offering 5 percent for a 13-month certificate of deposit, well above market rates. The offer is good until the end of today. WaMu said Thursday that deposit balances at the end of August "were essentially unchanged" from the end of 2007, and that it has about $50 billion in liquidity from "reliable funding sources." If it needs more liquidity, WaMu can tap the Federal Home Loan Bank for additional borrowings. However, FHLB has been tightening up on collateral and borrowing levels, analysts said.

[CUT]

The big unknown for WaMu and its investors is how much the thrift stands to lose from its mortgage portfolio, concentrated in hard-hit housing markets across the U.S. The company has predicted as much as $19 billion in cumulative losses, but many analysts argue that figure will be much higher, perhaps as much as $40 billion.

Not that anyone needs to be reminded, but much of that mortgage portfolio is in California.