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The first wave broke painfully. Sovereign wealth funds that rushed to recapitalise western banks early in the credit crisis are nursing heavy losses. Does the second wave of capital look smarter? UBS recently announced a rights issue underwritten by leading banks and Lehman has raised $4bn from preferred shares. Washington Mutual is now close to a $5bn injection from investors, including private equity group TPG.

The risk/reward calculation is certainly better now. Investors have had longer to estimate the scale of losses. Companies such as WaMu are cheaper. US authorities have thrown a huge amount at the financial system and, to some extent, the mortgage market. While it is not necessarily the turn for financials, given uncertainty around the US economy and house prices, new investors are clearly getting in closer to the bottom than their sovereign wealth peers.

The key will be how sweet the terms are for TPG. Investors, who bid WaMu’s shares up 30 per cent on Monday, might yet get a nasty surprise from the dilution they face. But TPG seems to be betting on a few things. First, that its board seat gives more influence than it might suggest. Second, that $5bn will tide WaMu over the worst losses the mortgage market can throw at it, giving TPG a valuable option on eventual recovery. Third, in dislocated financial markets, WaMu’s deposit base will prove very valuable. Fourth, that there are other sources of value, such as tax assets from recent losses.

For now, WaMu’s board appears to have stopped JPMorgan Chase from grabbing control of its second distressed financial institution in a matter of weeks. New equity gives WaMu an independent bet on recovery. JPMorgan, if it still wants WaMu, will have to hope the deal goes wrong or wait to give TPG a juicy profit further down the line.

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