Another 100 mortgage-backed traders and other assorted staffers are losing their jobs as part of Washington Mutual's exit from the sub-prime market.
The remaining employees of WaMu Capital Corp., the institutional broker-dealer subsidiary being shut down, represent a fraction of the 3,000-plus job cuts announced by the Seattle-based bank late Monday. These structured finance professionals will land in a job market awash with ejectees from the mortgage securitization arms of both investment banks and commercial banks - including WaMu Capital itself, which in September dismissed 100 traders, sales personnel and support staff.
WaMu Capital was launched in 2002 with a focus on selling mortgage-related and other fixed income securities and aiding the sale of whole loan packages to institutional investors.
According to the New York Post, the unit will now shrink from 125 people to "between 10 and 20" - apparently a skeleton crew to tie up loose ends. Last week, the Post reported that closure of WaMu Capital was imminent, but said the announcement was postponed because of Hanukkah. "Since early November, WaMu Capital was not providing repurchase agreements and in many cases, did not provide even basic bids and offers for bonds it had sold, according to hedge fund portfolio managers," the Post said.
Besides leaving the mortgage securities business, the parent company said it will discontinue all remaining sub-prime origination, close more than half of its 336 mortgage lending offices, and eliminate 2,600 home loan positions plus 550 corporate and other support positions. The moves aim to slash non-interest expenses by $500 million in 2008. WaMu also announced financial measures to shore up its capital base, including a $2.5 billion preferred stock offering and a 73 percent dividend reduction.
Washington Mutual stepped up its reliance on sub-prime lending last year while struggling to reverse a three-year profit slump. The abysmally timed strategy left WaMu with the highest exposure to risky loans among leading mortgage lenders. Twenty-nine percent of the loans WaMu made in 2006 were high-interest, mostly sub-prime loans, and 15 percent were for properties other than primary residences, according to Tuesday's Wall Street Journal.