Is Washington Mutual for Sale?

"This outlook revision is due to the increasingly challenging housing and mortgage markets and their related impact on WaMu's core mortgage franchise," the report said.

WaMu is especially vulnerable because many of its mortgage investments are in places with the weakest housing markets, said Lawrence J. White, an economics professor at New York University's Stern School of Business.

In a statement early last week, the bank's new chief executive Alan H. Fishman said he was intent on "returning the company to profitability as quickly as possible." Fishman, whose appointment was announced on Monday, replaces longtime WaMu CEO Kerry Killinger.

Peters said that Morningstar was reserving judgment on whether WaMu's new chief would succeed in turning the company around.

"Alan Fishman has a very strong resume, but he's never faced the size or depth of problems that Washington Mutual has," she said.

FDIC to the Rescue?

If WaMu is unable to weather the mortgage crisis on its own or doesn't succeed in selling itself, then the Federal Deposit Insurance Corporation could step in to take over the bank just as it has with other failed banks.

But Douglas McIntyre, the editor of the financial Web site 247WallSt.com, said that a WaMu takeover might be too big and expensive a job for the FDIC alone. The corporation, he said, would likely receive support from the U.S. Treasury Department.

The FDIC protects deposit accounts including checking and savings accounts, money market deposit accounts and certificates of deposit up to the federal limit. The insurance does not cover products such as stocks, bonds or mutual funds, even if they are sold by your bank.

The basic insurance protects up to $100,000 in deposits at each institution for each type of ownership category. That means one individual could be insured for up to $100,000 for a single account and another $100,000 in a joint account with a spouse or somebody else.

There is also a separate $250,000 insurance limit for various types of retirement accounts, including IRAs, Section 457 plans and Keogh plans.

The type of account or bank branch makes no difference when calculating an individual's insurance limit. Customers do not double their insured amounts by opening both a checking and savings account at a single bank or opening accounts at separate branches of the same bank.

With reports from ABC News' Dan Arnall.

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