In These New Times

CNBC

NEW YORK – Shares of Washington Mutual Inc. fell sharply Monday, as the collapse of Lehman Brothers Holdings Inc. and the sale of Merrill Lynch & Co. rattled the broader banking sector.

Washington Mutual Inc. lost 50 cents, or 18.3 percent, to $2.23 in morning trading.

The Seattle-based bank’s stock has been hit hard in recent sessions. Shares fell 46 percent last week as WaMu said it will take another multibillion write-down for bad bets on mortgage securities, but insisted it has adequate capital to fund its operations.

Shares have declined 80 percent so far this year, and 93 percent from a 52-week high of $39.25 set in September.

On Monday, Len Blum, managing director at the investment bank West Wood Capital told The Associated Press that insurance coverage for WaMu’s debt might not be available Monday over concerns about its stability and the broader financial services sector.

In a note to investors, Keefe, Bruyette & Woods analyst Frederick Cannon said Alan Fishman, the bank’s new chief executive, will have to move quickly to assure investors that it can weather the credit crisis.

Broader financial stocks also headed lower Monday morning after Lehman filed for Chapter 11 bankruptcy protection, Merrill sold itself to Bank of America Corp. for $50 billion and insurer AIG sought $40 billion in emergency funds — possibly from the Federal Reserve — to stave off a credit ratings downgrade.