Still Waiting at WaMu

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There's been so much rumpus over the bailout debate in Washington during the last several days that the market has paid little attention to the actual banks the program is designed to save.

One bank dangling on the brink that desperately needs breaking bailout news quickly? Washington Mutual (NYSE: WM  ) .

As far as the big banks go, WaMu is about as careworn as it gets … or at least that's how the market perceives it. It'll cost you $6.15 million to insure $10 million worth of WaMu for five years, plus an extra $500 grand a year to boot. Shares fell another 30% or so on Wednesday after S&P cut its credit rating to "poor quality," or financial jargon for "dead man walking."

What happened to a freakin' buyout!?
But, wait a minute, whatever happened to WaMu being sold? That was the topic of the day last week before the bailout became front and center!

Well, a looming buyout is partially what sparked the downgrades. As S&P put it, "The downgrade was due to the increased likelihood that a potential sale of the company may not involve the whole company …" If parts of the weighed-down company stick around, odds are that common shareholders will be left holding the bag.

JPMorgan Chase (NYSE: JPM  ) , Citigroup (NYSE: C  ) , Wells Fargo (NYSE: WFC  ) , and HSBC have at least been approached about their interest in buying the Seattle-based thrift, but we still haven't heard a concrete word from anyone regarding a potential sale. Why not?

For one, it's unlikely we'll see any moves from big banks until there's clarity as to what the mother of all bailouts will look like. The terms of the bailout -- what price assets will be bought at and how much (if any) equity will have to be forfeited to the Treasury -- are still unknown.

Next buyer … U.S. of A.?
But wait … what about the bailout itself? Couldn’t the Treasury buy toxic assets from WaMu's books, freeing it from a good part of the headache that's caused its downward spiral? Perhaps, and that's where things get interesting.

Clean up WaMu's books, and you've actually still got a pretty good franchise with a solid deposit base. Once the toxic junk gets jettisoned, you better believe swarms of banks and buyout funds are going to want a piece of the action. Goldman Sachs (NYSE: GS  ) and Morgan Stanley (NYSE: MS  ) , now that they've been granted bank-holding-company status, might be interested in bits and pieces. Or perhaps Blackstone (NYSE: BX  ) might take a nibble now that the Fed has loosened the restrictions on bank ownership.

The truth is, no one really knows what the future of WaMu will be, only that it'll likely be decided within the month. If you're into big-stakes gambling, WaMu's for you. If you have a sliver of financial responsibility in you, enjoy this show from the sidelines.

For related Foolishness:

Fool contributor Morgan Housel doesn't own shares in any of the companies mentioned in this article. JPMorgan Chase is a Motley Fool Income Investor recommendation. The Fool has a disclosure policy.

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