The thrift also plans to close its 186 stand-alone home loan offices and stop offering home loans through brokers. It will instead offer mortgages through its retail branches, where some of the affected mortgage employees will be offered jobs, spokesman Derek Aney said.

WaMu, as the thrift is known, said it expects a first-quarter loss of $1.40 per share, more than twice the 51 cents that analysts on average expected.

The Seattle-based thrift expects to set aside $3.5 billion in the quarter for loan losses, nearly twice what it previously projected, and said net charge-offs will total $1.4 billion.

WaMu will also reduce its quarterly dividend per share to 1 cent from 15 cents, saving $490 million a year. The cut is the second in four months.

"These companies are getting serious," said James McGlynn, a portfolio manager at Summit Investment Partners in Southlake, Texas. "They are bringing in capital, (and) getting out of businesses where they weren't efficient. It just seems like they are getting their comeuppance."

Shares of WaMu fell 73 cents, or 5.6 percent, to $12.39 in morning trading. They had risen 29 percent on Monday, after news of the thrift's plans to raise $5 billion first surfaced.

WaMu joined more than a dozen commercial and investment banks to seek cash from outside investors in the last year, following more than $200 billion of write-downs and credit losses tied to the nation's housing and credit crisis.

The thrift lost $1.87 billion in the fourth quarter, hurt by exposure to housing markets such as California and Florida.

While the thrift last year pared its exposure to subprime and other risky home loans, it didn't do so fast enough.

In a statement, Chief Executive Kerry Killinger said: "This substantial new capital -- along with the other steps we are announcing today -- will position us for a return to profitability as these elevated credit costs subside."

Killinger was not immediately available for further comment.

BONDERMAN REJOINS BOARD

In the capital-raising, WaMu sold about 176 million shares at $8.75 each, for gross proceeds of $1.54 billion. It also sold $5.5 billion of convertible preferred shares with an initial conversion price of $8.75.

David Bonderman, a founding partner of TPG and a director of WaMu from 1996 to 2002, will rejoin WaMu's board. Larry Kellner, the chief executive of Continental Airlines Inc (NYSE:CAL - News), will become a board observer, at TPG's request, WaMu said.

The investment could signal confidence in the banking system, but would expose TPG to losses if WaMu's business sours further.

"It's a sign of smart money making a major bet in what they hope is a bottom in real estate," said Robert Stovall, a strategist at Wood Asset Management in Sarasota, Florida.

It was not immediately clear which other investors were involved in the transaction, or how much each invested. Neither TPG nor Continental was immediately available for comment.

Last year, WaMu was the nation's sixth-largest U.S. mortgage lender and 11th-largest subprime lender, according to the newsletter Inside Mortgage Finance.

The thrift's other units include retail banking, commercial banking and credit cards. To shore up capital, WaMu in the fourth quarter cut its dividend 73 percent and sold $3.9 billion of preferred shares.

Goldman Sachs & Co., Lehman Brothers Inc and the law firm Simpson Thacher & Bartlett LLP assisted WaMu on the TPG-led transaction. Credit Suisse and the law firm Cleary Gottlieb Steen & Hamilton LLP advised TPG.

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From: http://biz.yahoo.com/rb/080408/washingtonmutual.html?.v=9