Washington Mutual (WM) Nose Dives On Fears

Washington Mutual (NYSE: WM) is down another 16% today, this on top of Wednesday's 30% drop and Tuesday's 20% drop. The stock is down more than 50% from Monday's close.

Investors are worried about the company's massive exposure to pay option ARMs and other problem loans. Write-downs could force the company to seek new capital, which is likely very limited.

On Monday, WaMu announced that Alan H. Fishman has been appointed its new CEO, replacing embattled CEO Kerry Killinger, who was CEO since 1990.

WaMu also announced that it has entered into a Memorandum of Understanding with the Office of Thrift Supervision (OTS) concerning aspects of the bank's operations, principally in several areas of its risk management and compliance functions, including its Bank Secrecy Act compliance program. In addition, WaMu has committed to provide the OTS an updated, multi-year business plan and forecast for its earnings, asset quality, capital and business segment performance. The business plan will not require the company to raise capital, increase liquidity or make changes to the products and services it provides to customers.

Credit defaults swaps on WaMu rose to a record as traders see a greater likelihood the company could default on their debt.

Analysts at Egan-Jones said, "drastic, timely action is required" from Washington Mutual.

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