Tuesday, September 16, 2008

Up the WaMu? (WB;WM)

From FT Alphaville:
...credit derivative markets are pricing the risk of a WaMu failure as “close to certain”, says the FT, with buyers of protection against a WaMu default paying a 40 per cent fee upfront and $500,000 annually. The failure of a bank of WaMu’s size would test the strength of the entire US deposit insurance system and its ability to maintain the confidence of the nation’s savers, particularly if it is seen as part of a wave of bank failures.

And just so you know it doesn’t end there by any means, the FT notes that credit derivative markets are also signalling concerns over Wachovia and GE Capital, the finance arm of the conglomerate General Electric. The cost of protecting GE Capital’s debt with CDS on Monday rose by 139bp to 348bp, or $348,000 a year to protect $10m of debt.