Citigroup CEO Chuck Prince has finally resigned. Cramer’s been calling for his ouster all year, so there’s reason to celebrate in Cramerica. But it does leave a gaping hole in the Mad Money Hall of Shame.
Luckily, Washington Mutual CEO Kerry Killinger is there to fill the space. Killinger’s doing such a horrible job, Cramer said, you’d think he is intentionally trying to destroy the company.
Under the guidance of Killinger, WM has recorded $421 million in charge offs from bad loans, and the bank has $5.45 billion in nonperforming assets, which are loans that aren’t being repaid in a timely manner. Interestingly enough, Washington Mutual only has 0.8% of the value of its loans set aside to offset these losses. Strange then that Wells Fargo, a much better firm in Cramer’s opinion, has set aside more.
And don’t let the yield fool you. The 9.5% payout that looks so attractive just isn’t sustainable, Cramer said, especially considering WM earnings per share over the past two quarters haven’t exceeded the dividend. A yield that high is a sign of weakness, not strength.
The lousy mortgage market that Washington Mutual is so overexposed to is just going to get worse, according to Cramer. He’s expecting a second wave of subprime-related problems, this coming from mortgage insurers like Ambac , MBIA and PMI Group .
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