SEATTLE – With the wreckage from the nation’s worst financial crisis piling up around it, Washington Mutual strived Wednesday to salvage itself, reportedly considering all options up to and including a sale of the entire company.

The company declined to comment on what it called “rumors and speculation.” But WaMu’s largest shareholder granted it a key financial concession – clearing the way for anything from a big capital infusion to an outright sale – and The New York Times and The Wall Street Journal both reported that investment bank Goldman Sachs has been shopping Seattle’s biggest financial institution to potential buyers.

WaMu’s options seemed to be narrowing almost hourly. With other troubled financial firms seeking buyers to avoid bankruptcy or federal takeover, fewer and fewer companies have both the means and the potential desire to buy WaMu.

“The cumulative, corrosive effect of all the bad news” is forcing WaMu’s hand, said Bert Ely, a banking industry consultant in Alexandria, Va. “They’re kind of twisting in the wind, and the pressure of time is working against them.”

Most commonly mentioned as potential buyers were JPMorgan Chase, Wells Fargo and HSBC. Other names that observers suggested include Citigroup, U.S. Bancorp, Barclays, Banco Santander and BNP Paribas.

Other options include raising cash by selling off pieces of WaMu’s retail branch network – widely considered the most valuable part of the company – and attracting another large infusion of capital, along the lines of the $7.2 billion deal led by private equity firm TPG in April.

The TPG-led group paid $8.75 a share for stock and warrants potentially worth more than half the company. But WaMu shares have plunged even further since then; they closed at $2.01 Wednesday.

TPG, which itself owns about 16 percent of WaMu, on Wednesday removed a big obstacle to any deal. It waived an earlier agreement that, if WaMu sold more than $500 million of new stock – or the entire company – at a lower per-share price than what the TPG investors paid, WaMu would have to pay hundreds of millions of dollars as compensation.

Most observers consider Chase to be the leading contender for WaMu. Combining WaMu’s branch network – particularly on the West Coast – with Chase’s strong position in the Northeast would transform it into a truly coast-to-coast institution, joining Citigroup and Bank of America.

Chase offered to buy WaMu for $8 a share earlier this year, a deal former CEO Kerry Killinger spurned in favor of the TPG investment. Killinger had hoped the $7.2 billion from the TPG-led group would be enough to see WaMu through the turmoil sweeping through the U.S. financial sector.

But Killinger was ousted nearly two weeks ago and replaced by Alan Fishman, a hard-nosed veteran banking executive from Brooklyn with experience in both buying and selling banks.

WaMu’s vast retail network – 2,239 branches in 15 states – and customer base would be the big prizes to any purchaser, whether a domestic bank looking to expand or a foreign bank seeking an instant nationwide footprint.

“It’s an absolutely irreplaceable, cannot-be-duplicated network of physical locations and good people in place,” retired WaMu executive vice president Lee Lannoye said.

But Jamie Peters, an analyst with Morningstar in Chicago, said there were signs that WaMu’s mortgage-related troubles have started to affect its retail banking operations.

Last week, in an effort to calm fearful investors, WaMu said retail deposits stood at $143 billion at the end of August. But Peters noted that on June 30, WaMu’s retail deposits were $148.25 billion.

“Five billion dollars floated out the door in two months -and that was before they were in the headlines every day,” she said. “That worries us. Their core franchise is that deposit base, and they have to maintain the confidence of their customers.”

WaMu’s heavy presence on the West Coast, especially in California, could pose antitrust difficulties for some potential acquirers. San Francisco-based Wells Fargo, for instance, probably would have to sell off hundreds of branches in California.

Other potential U.S.-based partners would seem to be off the table. Citigroup, which reportedly looked at WaMu earlier this week but decided not to proceed, already has lost $7.6 billion this year and has tens of billions of dollars in subprime-related exposure. Bank of America agreed to buy Merrill Lynch over the weekend; Wachovia, itself reeling under the pressure of busted mortgage investments, reportedly is considering a merger with Morgan Stanley.

Yet another possibility: TPG and its partners could try to protect what’s left of their $7.2 billion investment by kicking in more cash, or they could simply buy the rest of WaMu themselves – removing it from the scrutiny of the public markets and perhaps giving it more time to right itself.


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What happens to customers if WaMu changes hands?

Depositors:

If WaMu were bought by another bank, checking account and credit card numbers eventually might change, but that can take months or longer. An acquirer typically gives customers plenty of notice.

If WaMu were taken over by the federal government, the Federal Deposit Insurance Corp. insures up to $100,000 per depositor, and $250,000 for money (but not securities) in certain retirement accounts. According to the FDIC’s web site, no bank customer in its 75-year history has ever lost a single penny of insured deposits..

Borrowers:

Mortgages and other loans from WaMu would not be called in or otherwise affected by a change in control of the bank.

For a calculator of FDIC insurance and other information, go to www.myfdicinsurance.gov.

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(c) 2008, The Seattle Times.

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AP-NY-09-17-08 2233EDT