Wachovia, WaMu still in big trouble

Those ill-fated twins of the subprime-mortgage calamity, Washington Mutual and Wachovia, are getting clobbered again, after some dramatic housecleaning at the top.

Wachovia's board kicked out chief Ken Thompson last week. He was largely responsible for the bank's ill-timed 2006 purchase of Golden West Financial. An adjustable-rate-mortgage machine during the housing boom, Golden West tracked much of the subprime muck into the house of Wachovia -- before it was obvious these loans would become so widely problematic.

Washington Mutual hasn't gone so far. It merely stripped chief Kerry Killinger of his role as chairman, beginning next month. Like Wachovia's Thompson, Killinger oversaw his bank's star-crossed foray into the subprime lending.

To some, those changes will sound like a fresh start. But don't count on these two banks to get up off the mat anytime soon. Based on a new analysis from a stock research firm, I'd wager a tsunami of profit-crushing write-downs on bad loans will hit each bank this year. Substantial assets -- homes they hold loans on -- simply aren't worth as much as they're owed, and the loans won't be repaid.

Home foreclosures still haven't peaked, and Wachovia and Washington Mutual haven't faced the extent of the damage, at least judging by their financials...

These problems are a big deal to people whose mortgages are involved, of course. They also matter to investors who own these battered stocks or might be tempted to buy them.

The stocks have fallen an additional 25% in the past week or so, hitting lows not seen in more than a dozen years. Washington Mutual trades under $7 a share, compared with $44 a year ago. Wachovia's shares have fallen below $20, down from $55 about a year ago.

New lows often signal a good time to buy stocks, but not in these cases. Here's why...

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