Rethinking

WaMu's bonds now cost 50% up front plus 5% a year to insure. What does this mean? This means that WaMu cannot borrow money and will be unable to refinance bonds as they come due. A quick look at WaMu's annual report shows that they borrowed over $40 billion from the Federal Home Loan Bank last year. They also had another $38 bil in other debt. On top of that, AIG shareholders have quickly abandoned the sinking ship, pushing the stock down -50%. I told you they should have taken whatever they could get. Also, Bank of America is currently down 15%. That makes the Merrill deal worth 15% less.

Of course it's down. Anyone owning Merrill shares will hedge their losses by selling BAC. Duh-uh! Maybe it's greedy, but I'm holding out for some big payoffs. I don't think the market is taking the Lehman bankrupcy seriously enough. The Fed didn't let them fail because they weren't important. The Fed let them fail because they had to.