Hall of Shamer: Washington Mutual’s Kerry Killinger
Web Editor, "Mad Money"
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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