The Five Dumbest Things on Wall Street This Week

2. WaMu Whammy

The credit crunch hasn't hurt Washington Mutual's (WM Quote) self-confidence.

The Seattle-based bank posted a 72% drop in third-quarter earnings Wednesday and said it expects to feel more pain over the next year. WaMu plans to add almost $3 billion to its loan-loss reserves this year as mortgages go bad by the bushel.

"We're disappointed with our third-quarter results," CEO Kerry Killinger said, "but they reflect the increasingly difficult market conditions that are challenging the banking industry."

By now, everyone agrees that the financial industry is facing difficult market conditions. That's why banks from Citi and JPMorgan on down have been saddled with billion-dollar writeoffs of bad loans and faulty securities.

But WaMu couldn't leave it at that. Reviving an excuse last heard during the tech bubble, WaMu now claims it has limited visibility into future results.

"Let me just say that I have never seen housing credit conditions change so significantly over such a short period of time," finance chief Tom Casey said Wednesday on a conference call Wednesday. "Nor can I remember a period when there was less clarity about near-term housing and credit trends."

That's an odd claim, given that housing and credit trends could hardly be clearer. Housing prices have been flat or falling nationwide for the past year, after a long run-up that started in earnest earlier this decade. Credit trends appear similarly ominous, with defaults and delinquencies rising sharply.

Yet Killinger is ready to accept congratulations for his foresight.

"I'm very pleased with how we've managed the company through this period of stress," he said on the call. "Our management team has spent much of the last year diversifying our borrowing sources and proactively addressing the rapidly changing market conditions."

Proactive? No, this management team is just inept.

Dumb-o-Meter score: 90. The good news is that the weak earnings overshadowed the cease-and-desist order WaMu got from its regulator over alleged Bank Secrecy Act violations.