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Nov.06

10:19 AM ET

Tuesday, 6 Nov 2007

Hall of Shamer: Washington Mutual’s Kerry Killinger

Posted By:Tom Brennan

Topics:CEOs and CFOs | Mortgages | Stock Picks | Stock Market

Sectors:Banks | Financial Services

Companies:PMI Group, Inc. | MBIA Inc | Ambac Financial Group Inc

Citigroup [C Loading... () ] 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 [WM Loading... () ] 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 [ABK Loading... () ], MBIA [MBI Loading... () ] and PMI Group [PMI Loading... () ].

So that Nov. 7 analyst meeting Washington Mutual is having? That would be the perfect chance for Killinger to announce his retirement, Cramer said.

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Jim's charitable trust owns Citigroup.

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