WaMu Deal Could Take Time

While some observers believe the threat of a WaMu failure is real, Gary Townsend, president and CEO of Hill-Townsend Capital, a private equity firm that he started in conjunction with Commerce Bancorp's ex-CEO Vernon Hill, says regulators should not act hastily.

Regulators and the government "would like a solution quickly and perhaps might even be pushing [for a deal], when it would be smarter to sit back and provide more time," says Townsend, who spent seven years as chief examiner of the Federal Home Loan Bank system.

But Thomas says it is more likely that WaMu, with $310 billion in assets, is likely to undergo a government-assisted merger before it were to fail.

"I think they government would not let them fail," Thomas says. "They would make sure to put them into a merger with somebody. Clearly there are [banks] out there that could use their franchise desperately." JPMorgan Chase, for one, has little presence in Florida and California, while Wells Fargo is looking to expand its presence in Texas.

WaMu executives are also considering raising additional capital, according to the article. The company raised more than $7 billion in April from an investor consortium led by private equity firm TPG. The firm recently waived a provision in its investment agreement requiring WaMu to pay it back for any significant dilution to its stake if the company decided to raise more capital or sell itself.

"Is this an accounting issue or the value of underlying assets has weakened so much to threaten the company's insolvency?" asks Townsend. "I suspect that others are struggling with that same question."

WaMu shares closed down 92 cents, or 21.7%, to $3.33 on Monday.