Washington Mutual (WM) is attracting interest from major banks, but possible suitors may bid for just parts of the nation's largest savings and loan.

JPMorgan Chase (JPM), Citigroup (C), Bank of America (BAC) and Wells Fargo (WFC) may make bids. The banks declined to comment.

Washington Mutual has lost about 85% of its market value this year after heavy losses in the subprime mortgage market. The bank has about 2,300 branches and $143 billion in retail deposits, making it attractive to larger firms seeking to buy a distressed bank at a good price.

On Wednesday, Washington Mutual's largest shareholder, TPG Inc., agreed to waive a $1.5 billion payment it had negotiated if the troubled bank were sold. This is likely to make sale of the bank easier. In April, WaMu accepted a $7 billion infusion from TPG after rejecting a takeover bid by JPMorgan.

Morgan Stanley (MS) and Goldman Sachs (GS) are advising Washington Mutual on its possible sale, Bloomberg reports.

Earlier this month, Washington Mutual named Alan H. Fishman CEO, replacing Kerry Killinger. Killinger became WaMu's CEO in 1990, and built the Seattle-based thrift into one of the nation's largest banks.

Washington Mutual has issued many ARMs to home buyers in hard-hit housing regions such as California, Florida and Hawaii. Interest rates for many of the mortgages will reset in 2010 and 2011, creating what may be the next wave of trouble for banks hammered by subprime defaults in the last 2 years. ARMs account for about 50% of Washington Mutual's loans.

However, Standard & Poor's says the bank can meet its immediate obligations. Nevertheless, S&P cut WaMu's credit rating to "junk" status, or below investment grade.

It's unclear what price Washington Mutual will fetch. But given the deteriorating credit markets, it's unlikely an offer would come at a premium to the current valuation and may come at a steep discount. But the bank's value continues to erode - and its board needs to act quickly.

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