naked capitalism

Boy, the adverse developments are flying so fast and furious that it’s hard to keep on top of the stories.

From Bloomberg (hat tip reader Sunnny):

Washington Mutual Inc., the biggest U.S. savings and loan, had its credit rating cut to junk by Standard & Poor’s because of the deteriorating housing market.

S&P reduced its rating on Seattle-based WaMu to BB- from BBB-, leaving it three levels below investment grade, the ratings firm said today in a statement.

“Increasing market turmoil and the related impact from managing its concentrated mortgage franchise in this troubled housing and credit cycle led to the downgrade,” S&P wrote. S&P cut its rating on the subsidiary bank to BBB- from BBB…

WaMu tumbled 73 cents, or 27 percent, to $2 at 4 p.m. on the New York Stock Exchange. The shares dropped another 20 cents, or 10 percent, to $1.80 in extended trading. They’ve lost 94 percent of their value in the past year.

“On a more positive note, we recognize that WaMu’s holding company liquidity position is currently solidly positioned to meet all of its fixed obligations through 2010,” S&P said. “The bank is operating with adequate capital positions from a regulatory perspective and has demonstrated funding resilience as the deposit franchise has remained stable.”

Update 7:PM: This report from Bloomberg may square the circle:

American International Group Inc. is seeking a loan for as much as $75 billion through Goldman Sachs Group Inc. and JPMorgan Chase & Co. after the Federal Reserve balked at providing funding for the insurer, according to people familiar with the situation.

Representatives of Wall Street’s biggest firms convened at the New York Fed for a fourth consecutive day, this time to discuss the funding crisis at AIG. The Fed urged AIG to seek private capital and discouraged the insurer from expecting a loan from the central bank, according to two people with knowledge of the discussions.

New York-based Goldman and JPMorgan are working with AIG to determine how much the insurer needs, said two more people, all of whom declined to be identified because negotiations are private. The loan would involve temporary financing, a so-called bridge loan, through a syndicate of banks, the person said, adding that there’s no assurance an agreement can be worked out.

“We’re still working on a number of alternatives,” said Nicholas Ashooh, spokesman for New York-based AIG. JPMorgan’s Brian Marchiony and Goldman’s Lucas van Praag declined to comment.