Moody's downgrades WaMu

Moody's Investor's Service said it downgraded Washington Mutual Inc.'s long-term senior debt rating to A3 from A2 and its short-term rating to Prime-2 from Prime-1.

The outlook is negative.

The agency said the downgrades are in response to its view that U.S. home price declines will likely be more prolonged that originally anticipated, and as a result WaMu will require elevated provisions against its residential mortgage book throughout 2008; its more pessimistic view of the earnings from WaMu's credit-card operations due to increased credit costs; increased concern that WaMu's capital ratios could deteriorate because of the combination of reduced earnings and high dividends; and the unknown impact resulting from the investigation by the New York attorney general on appraisal practices in the mortgage market.

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