Washington Mutual may be next on block

There is uncertainty about losses in Washington Mutual's home loan portfolio. (Nick Ut/Bloomberg News)

NEW YORK - Ailing bank Washington Mutual Inc. appeared headed toward a sale yesterday after a major investor removed a potential stumbling block and nervous banking regulators began approaching the most logical buyers.

The New York Times, citing unidentified people familiar with the matter, said an auction of the bank was already underway, and The Wall Street Journal reported Wells Fargo amp; Co. and Citigroup Inc. expressed interest in a takeover.

WaMu, Wells Fargo, and Citigroup all declined to comment.

A concession by investment firm TPG, which injected $7 billion into WaMu five months ago, may have opened the way to a sale - or, failing that, made it easier for the bank to raise another round of capital.

TPG could have stymied the process because of protection when it bought its stake in April. A clause in its agreement could have required a buyer or another major investor to pay TPG hundreds of millions, if not billions, of dollars in addition to whatever money was injected into WaMu.

But TPG agreed to waive the clause after concluding WaMu needs all the help it can get.

"It became clear that it would be in the best interests of Washington Mutual and our investors to waive the . . . provisions," Fort Worth-based TPG said. "Our goal is to maximize the bank's flexibility in this difficult market environment."

The efforts to find a buyer, though, were being complicated by uncertainty about the magnitude of losses still lurking in Washington Mutual's home loan portfolio.

"No one knows what's in their books," said a person briefed on the talks between regulators and banks, speaking on the condition of anonymity because of the sensitivity of the matter.