Earlier today, Colonial BancGroup (NYSE: CNB) fell nearly 12% to 41 cents per share before trading was halted pending a news announcement. As it turns out, the troubled bank is being taken into receivership by the Federal Deposit Insurance Corp. (FDIC), while BB&T Corporation (NYSE: BBT) will acquire all of CNB's branches and deposits.

The announcement comes on the heels of a report in The Wall Street Journal (subscription required) that a federal judge has granted a temporary restraining order to freeze $1 billion of Colonial BancGroup's assets. The decision comes after Bank of America (NYSE: BAC) filed suit against CNB, seeking to protect its rights as trustee to $1 billion of loans received from Freddie Mac (NYSE: FRE). U.S. District Judge Adalberto Jordan ruled in Bank of America's favor, citing his concern that Colonial "is on the brink of collapse."

IndyMac Bancorp Inc. (NYSE: IMB) is continuing to see problems with raising enough money to stay in business. In fact, the bank has ceased taking loan applications. In addition to not taking new lending business, the company will lay off more than half of its workforce, about 3,800 employees.

The problem is that IndyMac hasn't lined up any new financing or capital investment and doesn't expect to recover until the mortgage market begins recovering. In other words, the rest of 2008 is going to be pretty harsh for the once high-flying mortgage lender. CEO Michael Perry said that U.S. banking regulators have asked IndyMac to submit a business plan that will show how the struggling lender will get back on its feet.

The retail and wholesale loan divisions will be closed to new business as the company tries to build its reverse mortgage business while maintaining the existing loans in its portfolio. Perry went on to say that "These are the largest and most difficult staff reductions we have ever had to make" in reference to IndyMac's looming layoffs. He also requested that IndyMac's board cut his $1 million annual salary in half (no word on bonus cuts). At least one banking CEO has a conscience, right?

All week we've watched the cards fall in a cascade of bad news from banks and savings institutions. The first major card to fall was UBS (NYSE: UBS), which was followed with warnings from Citigroup (NYSE: C), Merrill Lynch (NYSE: MER) and Bank of America (NYSE: BAC). Today one of the nation's largest mortgage originators, Washington Mutual (NYSE: WM), warned that it expects to write down $150 million on mortgage loans it planned to sell and set aside $975 million to cover future losses on its portfolio of loans.

Bloomberg reported this would drop net income to $187 million and be the worst performance for Washington Mutual since 1998. Shares of stock in Washington Mutual dropped 28 cents, from yesterday's close of $35.28 to $35 in early trading. Expect it to fall further as the news of this loss spreads.

You won't be able to learn any additional details about the company until its final results for the quarter are released on October 17. Expect a blood bath on bank stocks between now and the end of October as full details are released about mortgage loan loses. I wouldn't buy any bank or savings institution stocks now, but they may be worth looking at after the carnage is complete.