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NEW YORK (AP) -- Shares of Washington Mutual Inc. tumbled in Tuesday after analysts cut ratings and price targets on the bank after it said it would cut jobs, slash its dividend, set aside more money for loan losses and raise cash through a convertible preferred stock offering. Washington Mutual shares fell $1.55, or 7.8 percent, to $18.33 in midday trading. Shares have traded between $16.75 and $46.38 during the past year. Late Monday, Washington Mutual said it would issue $2.5 billion in convertible preferred stock to boost its capital, cut more than 3,000 jobs, slash its quarterly dividend to 15 cents per share from 56 cents per share and set aside up to $1.6 billion to cover loan losses in the fourth quarter. Friedman, Billings, Ramsey & Co. analyst Paul Miller questions if that will be enough to help cover mounting losses in the bank's lending portfolios. "We believe the current capital raise will be insufficient to get through the next few quarters, and we expect further capital raises in coming months," Miller wrote in a research note. Miller cut his price target to $12 from $14. Citi Investment Research analyst Bradley Ball lowered his rating on Washington Mutual to "Sell" from "Hold," saying the magnitude of the plan was worse than expected. Ball cut his price target on Washington Mutual to $15 from $21. Ball said the "desperate measures" should stabilize capital and liquidity at Washington Mutual, but provide almost no support for near-term growth. Because of the measures and expected continuing deterioration in the housing and mortgage markets, Ball estimates Washington Mutual will lose 8 cents per share in 2008. Washington Mutual, like many other banks, has been hit by the weakening housing market and rising delinquencies and defaults among mortgages, especially subprime mortgages and home equity products. Subprime mortgages are loans typically given to customers with poor credit history.
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