My bank is now junk. Yay for me

Washington Mutual's travails continue. But it's people like me, the lowly depositor, who keep the fires burning

Published September 12, 2008 4:41PM (EDT)

If Washington Mutual's decision to fire its CEO and release third quarter financial numbers six weeks early was intended to reassure financial markets that everything was A-OK, the ruse seems to have failed. On Friday, citing "reduced financial flexibility, deteriorating asset quality, and expected franchise erosion," Moody's Investor Service downgraded WaMu's credit to "junk" status.

My bank is junk. I am annoyed. Yesterday, I said I didn't care that my bank was failing, but now I'm beginning to take it personally. My franchise is eroding. I feel tainted.

Interestingly, it appears to be people like me, good old regular depositors, who are keeping the bank afloat. The buzz on Wall Street is that WaMu may have to sell some of its retail branches to raise cash, because, basically, that's all they've got.

Bloomberg reports:

"The only real asset they have that's worth anything to other banks is the deposit base, because of their branches," said L. William Seidman, chairman of the Federal Deposit Insurance Corp. from 1985 to 1991. Seattle-based WaMu can probably sell branches in New York and Chicago, said Bert Ely, president of Ely & Co. Inc., a bank consulting firm based in Alexandria, Virginia.

As of August 31, Washington Mutual reported retail deposts of $143.6 billion. That's down about five billion dollars from June 30, but still strikes me as a whole lotta junk.

And it brings up a strategic question. A number of readers suggested yesterday that I move quickly to close out my WaMu accounts and find another bank, perhaps even a locally-owned credit cooperative to get a piece of that indie-rock feel-good financial DIY action. Getting reimbursed by the FDIC, warned my myriad of helpful financial advisors, can be time-consuming.

But if WaMu's retail banks are WaMu's strongest asset, isn't it more likely that my business will just be sold to someone else before the bank goes belly up? And wouldn't the quickest way to give WaMu real heartburn be for me and a million other WaMu customers to demand our money and hightail it to the next county?

My bank might be junk, but I'd hate to start a panic.

By Andrew Leonard

Andrew Leonard is a staff writer at Salon. On Twitter, @koxinga21.

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