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Washington Mutual shares rally sharply

Shares in Washington Mutual Inc, the savings and loan firm seen as next on the precipice of the US financial crisis, rallied on Friday as the US government moved toward a massive bail-out of nationwide mortgage debt and cracked down on stock trading.

Three companies — JP Morgan Chase & Co, Citigroup Inc and Wells Fargo & Co — may be interested in bidding for the savings and loan firm, Bloomberg financial news service reported. A fourth company, Banco Santander SA, was also interested, the London Financial Times reported.

After a week of extremely volatile trading, New York stock indices were rallying again on Friday as financial stocks lifted.

Surging financial stocks make Washington Mutual’s sale more likely, Michael Kao, a money manager in Woodland Hills, California, told Bloomberg.

Bank stocks rose worldwide after US Treasury Secretary Henry Paulson and Federal Reserve Chairman Ben Bernanke proposed removing troubled assets from the balance sheets of financial companies.

The US government has plans to hunker down over the weekend to come up with a comprehensive plan to rescue the economy from collapse and unblock the credit freeze, US President George W. Bush and several federal finance officials said.


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