Washington Mutual Shares Trade at 17-Year Low as Regulator Monitors

Investors have sparked a mass sell-off of the shares of the largest savings and loan bank in the U.S. on fears that it might not survive its exposure to the floundering mortgage market. The activity has drawn the eye of the U.S. Office of Thrift Supervision.

Seattle-based Washington Mutual (NYSE: WM) is watching its shares trade under the $2 level Thursday for the first time since 1990. The company’s stock started the week above $4 per share and hit a 52-week high of $39.25 on September 19, 2007.

Investors have soured on WaMu this week since the bank announced Monday the ouster of longtime CEO Kerry Killinger. There are fears that new CEO Alan Fishman may not have time to right the company after soaring losses tied to mortgages.

WaMu said recently that mortgage losses could reach $19 billion through 2011.

"The question becomes can it survive if it has billions and billions of dollars left to write down on those loans?" Ladenburg Thalmann analyst Richard Bove told the Associated Press. "What's going to keep it in business, what is going to keep it alive?"

Reuters also reported that the U.S. Office of Thrift Supervision is "monitoring the condition" of WaMu. "We're fully aware of the situation [stock sell-off] and we're monitoring it," OTS spokesman William Ruberry told Reuters.

Last quarter, the company lost a record $3.33 billion, including a rare loss in its credit card unit. Washington Mutual got into the credit card business in 2005 when it bought subprime card issuer Providian Financial Corp.

Analysts are fearful that WaMu will not be able to find a buyer or raise enough capital to keep it afloat during the current downturn.