Washington Mutual gains $7 billion in new capital

Washington Mutual Inc. secured $7 billion in new capital Tuesday, an injection that is aimed at reviving the company, despite ballooning loan losses, but which may also push it to rethink its strategy, slim down and revamp the management.

The nation's largest savings and loan has been badly hurt by rising delinquencies and defaults on mortgages, and efforts last year to rehabilitate its finances fell short, despite assurances from management that slashing its dividend, raising nearly $3 billion in a stock sale and leaving the subprime mortgage business would be sufficient.

Washington Mutual said it would get the new capital from an investment group led by private equity group TPG but will cut its dividend again and post both a wider loss and set aside more in loan loss provisions for the first quarter than had been expected. TPG founding partner David Bonderman, a former WaMu director, will also rejoin the board.

Separately, the thrift said it will get out of the wholesale lending business, close all remaining standalone home-loan centers and lay off about 3,000 workers.

"I think it's enough capital to get them all the way through," said D.A. Davidson & Co. analyst Jim Bradshaw, who said he expects the company to increase the amount it sets aside for delinquencies and mortgage defaults this year to as much as $12 billion, from an earlier forecast for $8 billion.

The company has home-loan centers in Midvale, Salt Lake City and Ogden; others in Park City and Orem were closed after the company last December decided to discontinue remaining lending through its subprime mortgage channel. At the time, the company reported about 50 Utah employees would lose their jobs.

The corporate office did not return phone calls Tuesday from the Deseret Morning News regarding how the cuts would affect Utah locations or employees.

But a loan officer in the company's Salt Lake center said the three remaining home-loan offices in Salt Lake, Midvale and Ogden employ 13 or 14 people. Loan officers were offered positions in bank branches, but "for quite a big pay cut," the loan officer said, adding he felt few would take up the offer but that many would end up finding jobs elsewhere.

"I'm upbeat," said the longtime loan officer, who asked not to be identified. "The announcement came yesterday at 5, and I had recruiters (calling) before that, even."

Those new to the industry, however, may have a different outlook, the worker said.