NEW YORK The U.S. government has been reaching out to large banks in an effort to organize a buyout of the beleaguered Washington Mutual Inc., according to a person briefed on the talks between regulators and banks.
The obstacle, however, is that "no one knows what's in their books," the person said, speaking on condition of anonymity because of the sensitivity of the matter. There could be, the person said, "a minimum amount of value there."
A New York Post report Wednesday citing unnamed sources said regulators have reached out to Wells Fargo & Co., JPMorgan Chase & Co. and HSBC Holdings PLC, among other institutions. The Post said no discussions of a deal between any of those banks and Washington Mutual were under way.
"I think people do know what is in our books and we've been pretty transparent," said WaMu spokeswoman Olivia Riley. "If you do want to know how we're doing, take a look at the numbers we released last week."
A week ago, Washington Mutual said it has "sufficient liquidity and capital to support its operations while it returns to profitability." The nation's largest savings and loan said it expects its provision for bad loans in the third quarter to be $4.5 billion. Of that amount, $3.4 billion is for residential mortgages. Both totals are lower than in the second quarter.
The Seattle-based bank also said last week that net charge-offs are expected to rise by less than 20 percent in the third quarter, compared with an increase of nearly 60 percent in the second quarter, and that net interest expense is expected to be down about $200 million.
During the second quarter, Washington Mutual lost $3.33 billion, or $6.58 per share, as it set aside more than $8 billion to cover souring loans in its mortgage portfolio.
Washington Mutual's net charge-offs, or loans written off as not being repaid, totaled $2.17 billion during the second quarter. Non-performing assets at the bank rose sharply during the second quarter as well to 3.62 percent of total assets, from 2.87 percent just three months earlier.
Shares of Washington Mutual have plummeted in recent weeks amid continued concerns about mounting losses in the bank's lending portfolios. In afternoon trading Wednesday, they slipped 13 cents, or 5.5 percent, to $2.19.
Washington Mutual shares have fallen 49 percent over the past month and are off 83 percent for the entire year.Washington Mutual has been among the banks hardest hit by the slumping housing and mortgage markets. Since the middle of 2007, mortgages have increasingly defaulted, forcing nearly all banks to set aside more cash to cover borrowers who are no longer paying off their loans.
AP business writer Sara Lepro contributed to this report.