WaMu to Cut 3,000 Workers in Downsizing

Subprime mortgages were like steroids for lenders; they ballooned up. Now Washington Mutual is shrinking back down to a regular size. It's exiting the wholesale lending arena, and shuttering all 186 of its stand-alone home loan centers. That means layoffs of 3,000 employees, even though WaMu will still be offering home loans through its retail branches. The AP has the full restructuring story. (Wonder how many of those employees have WaMu mortgages?)

It's likely that this move is not unrelated to a capital infusion of $7 billion from private equity firm TPG. That sounds like a lot to us, but WaMu plans to "lose $1.1 billion during the first quarter and take a provision for loan losses of $3.5 billion — $1.5 billion more than previously expected." One analyst thinks this year's losses could amount to between $10 and $12 billion.

TPG is known as a turnaround investor, which makes for some interesting reading between the lines in that AP story:

The federal Office of Thrift Supervision helped clear the way for the capital injection on Monday by approving TPG's request that the deal not be considered a legal "change in control" of the company. The regulator agreed with TPG's argument that it is acquiring Washington Mutual securities "for investment purposes only" and not to control the management.

Yes, they'll be the 176-million-shares-holding investor with no interest in controlling management. Possibly as evidence, WaMu CEO Kerry Killinger hangs in there, against all reason and betting pool odds. In the words of various actors in multiple TV movies, "This isn't over."