From CNN:

Regulators have been in touch with Washington Mutual (WM). The Seattle thrift announced Monday that it entered into a memorandum of understanding with the Office of Thrift Supervision “concerning aspects of the bank’s operations, principally in several areas of its risk management and compliance functions, including its Bank Secrecy Act compliance program.”

As part of the arrangement, WaMu has agreed to provide the regulators with “an updated, multi-year business plan and forecast for its earnings, asset quality, capital and business segment performance.”

Make no bones about it, Washington Mutual, the largest U.S. savings and loan, is in trouble. Deep, deep trouble. The kind of trouble that walks into bars and turns the head of every hardboiled private dick. Serious, serious trouble.

A month and a half ago the thrift reported a $3.33 billion dollar quarterly loss, losing money in nearly every phase of the company’s operations - shortly after receiving a seven billion dollar injection from Fort Worth-based TPG.

TPG bought shares in WaMu at $8.75 apiece when it was trading at $13.15. Today’s closing price was $4.12.

Rock, meet hard place. Hard place, meet rock. WaMu needs capital desperately in order to offset increasing mortgage losses - losses that are only expected to grow larger as more and more of WaMu’s California Alt-A and Option ARM go bad. But given the deal made with TPG, which requires that the group be compensated for the difference should WaMu raise additional capital, raising capital isn’t something WaMu can easily do.

That’s why the bank has been recently offering rates of 5 percent on CD products. It needs money, and money badly.

A bank that’s short on money is not a good thing, and it is of no great surprise that the OTS has come knocking and now has the lender unedr its watchful eye. What will be surprising is if WaMu survives.

Calculating, originally uploaded by thermophle.