WaMu solidifies finances

SEATTLE -- Washington Mutual Inc. secured $7 billion in new capital Tuesday, an injection aimed at reviving the company despite ballooning loan losses but which may also push it to rethink its strategy, slim down and revamp management.

The country's largest savings and loan has been badly hurt by rising delinquencies and defaults on mortgages, and efforts last year to rehabilitate its finances fell short despite assurances from management that slashing its dividend, raising nearly $3 billion in a stock sale and leaving the subprime mortgage business would be sufficient.

Washington Mutual said it would get the new capital from an investment group led by private equity group TPG, but will cut its dividend again and post both a wider loss and set aside more in loan loss provisions for the first quarter than had been expected.

TPG founding partner David Bonderman, a former WaMu director, will also rejoin the board.

Separately, the thrift said it will get out of the wholesale lending business, close all remaining standalone home loan centers and lay off about 3,000 workers.

"I think it's enough capital to get them all the way through," said D.A. Davidson & Co. analyst Jim Bradshaw. "I suspect the company is going to be smaller a year from now, maybe dramatically smaller."

Shares of Washington Mutual, which had soared more than 29 percent Monday on news a capital deal was near, fell $1.31, or 10 percent, to $11.84 Tuesday.