WaMu rebounds as investor clears way for sale

Shares of Washington Mutual Inc. rebounded Thursday, after a major investor cleared the way for a possible sale or capital raise and the broader markets soared in late trading Thursday following the report of a possible new government entity that would absorb banks' bad mortgage debt.

Shares jumped 98 cents, or 48.8 percent, to $2.99. Shares lost 13 percent to close at $2.01 on Wednesday. The stock is down about 85 percent the year to date.

Late Wednesday, private equity firm TPG, which led a $7 billion investment in the bank in April, waived a provision of its agreement that would have required a potential buyer or other major investor to pay TPG hundreds of millions of dollars in addition to whatever money was injected into WaMu.

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On Thursday, Goldman Sachs Group Inc. removed its rating and price target on the Seattle-based savings and loan, saying it is acting as a financial adviser to the bank in connection with a transaction.

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Media reports have swirled in the last few days that WaMu is actively shopping for a buyer. The New York Times, citing unnamed sources, said an auction of the bank was underway, while The Wall Street Journal reported Wells Fargo & Co. and Citigroup Inc. have expressed interest in the bank.

WaMu, Wells Fargo and Citigroup have all declined to comment on the market rumors.