View more on these topics

Washington Mutual to get $5bn capital injection

Americas largest building society, Washington Mutual, is set to be bailed out with a much needed $5bn (2.51bn) capital injection from a consortium led by TPG, the US buyout firm, to address concerns over its balance sheet.

The 119-year-old lender has reported more than $3bn in mortgage writedowns and loan losses since the start of the credit crisis last summer following a misguided spree in the US sub-prime market.

Its share value has fallen by 74% since last year, falling to just $9 on Friday 4 April before recovering again to $13.26 on news of the rescue package.

Washington Mutual has already cut 3,000 jobs and raised $3.7bn via a rights issue.

Reports from the US suggests that the lender is set to withdraw from the wholesale lending business and close all its stand-alone home loan centres. As a result WaMu loans would no longer be available through intermediaries, though they would still be available through branches or on line.

News of the deal coincided with the announcement that the US Federal Reserve was offering $50bn in 28-day credit through its Term Auction Facility. The minimum possible bid is $5m and the maximum is $5bn with amounts being available at $100,000 tranches.

This auction is one of many that has been offered by the Fed since December in an effort to inject liquidity into the markets and stave off further turmoil. Similar actions have been taken by the Bank of England and the European Central Bank for the same reasons.

Recommended

Payment shock clients get advice

The 1.4 million borrowers likely to face higher mortgage costs this year as a result of payment shock will be offered advice by the Money Advice Trust and the Council of Mortgage Lenders. Supported by the House of Commons, MAT has been working with the CML to publish advice for clients expected to be affected […]

School of Sales will bring in fresh blood

In football a good manager must strike a balance between having experienced hands guiding the team and bringing in new players to add an extra dimension. They also need trainees willing to learn the ropes to ensure the team remains strong in the future.

Newsletter

News and expert analysis straight to your inbox

Sign up