Speculation Swirls Around WaMu, Morgan

Rumors continued to fly Thursday morning about the possibility that Washington Mutual and Morgan Stanley could soon be sold, raising questions about the future of the mortgage finance landscape. Washington Mutual filed a notice Wednesday with the Securities and Exchange Commission indicating that TPG Capital, leader of an investment consortium that owns about half of WaMu's shares, gave up protection from equity dilution in the event of a sale or other capital-raising event. JP Morgan Chase, Wells Fargo, HSBC, and Citigroup have been mentioned as possible suitors for WaMu. Meanwhile, Morgan Stanley is reportedly in "advanced talks" to sell itself to Wachovia Bancorp and has also approached a Chinese sovereign wealth fund about making an additional investment in the firm, according to Reuters. However, some analysts are questioning the logic of a Morgan Stanley-Wachovia pairing, noting that Wachovia is already struggling to manage credit losses on a $122 billion option-ARM portfolio largely inherited from its 2006 acquisition of Golden West.