Back in February, I noted a fascinating story in the Puget Sound Business Journal (Seattle), depicting the rise and fall of WaMu.

I want to direct your attention to another major story about Washington Mutual, also at the Puget Sound Business Journal, detailing the final days at the bank. Its still behind the Puget Sound firewall, but is available at Portfolio.com. (Did you know Portfolio was still publishing? Me neither.)

Here’s your Ubiq-cerpt™:

“To recreate WaMu’s final days, the Puget Sound Business Journal examined hundreds of pages of documents obtained through the Freedom of Information Act and interviewed dozens of former WaMu executives and employees, as well as government regulators and outside observers. Many sources would only speak on condition of anonymity. These sources, including insiders who lived through WaMu’s downfall, paint a picture of panic, confusion and futility as events spiraled out of control.

These interviews show that WaMu suffered through not one but two bank runs in its final months. The first run was many times larger than the run that felled California lender IndyMac in July 2008, though neither shareholders nor the public knew about it. WaMu survived that run, and the second run was tapering off when regulators moved in and shut the bank, citing the run as the reason.

In addition, WaMu’s top executives, led by CEO Alan Fishman, were trying to sell the bank after federal regulators imposed a deadline, only to discover that they were being undermined by those same regulators, executives say. The government’s plan to seize the bank, if it became known beforehand, would cause potential buyers to immediately cool their heels, because buying after a government takeover would be a lot cheaper than even the desperate private purchase deal that Fishman was seeking.

The takeover of WaMu prevented a potentially catastrophic hit to the deposit insurance fund. In that sense the seizure was a success: Not a dime of the FDIC’s then $45 billion fund went to reimburse WaMu depositors because JPMorgan Chase had taken over.

Yet even a year later, fundamental questions remain unanswered. And in part because regulators have said so little about their actions, there remains a voracious appetite to get to the bottom of why WaMu failed.”

More at the link below . . .

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Source:
A Giant Downfall
Kirsten Grind
Puget Sound, Sep 25 2009

http://www.portfolio.com/industry-news/banking-finance/2009/09/25/washington-mutual-downfall-anniversary/

Category: Bailouts, Credit, Regulation

Please use the comments to demonstrate your own ignorance, unfamiliarity with empirical data and lack of respect for scientific knowledge. Be sure to create straw men and argue against things I have neither said nor implied. If you could repeat previously discredited memes or steer the conversation into irrelevant, off topic discussions, it would be appreciated. Lastly, kindly forgo all civility in your discourse . . . you are, after all, anonymous.

6 Responses to “The Last Days of WAMU”

  1. jc says:

    The Wamu shutdown didn’t cost the FDIC a penny? Isn’t there a $30B US loss guarantee to Chase? Loss free but not risk free yet. I wonder what the annual premium would be for a $30B insurance policy (like AIG) would cost? Thats the implied cost of this pwnny free WAMU solution, no?

  2. No — that was for the purchase of Bear Stearns ($29B) — not WAMU

  3. ZackAttack says:

    Even though it was clear *exactly* what was going to happen to them, they were so, so hard to short until the collapse was really well underway.

    The problems started to become apparent back in February, 2007. Cramer pumped them on his show, saying that their deposit base would cover any and all sins. They were still around 45, as I recall, in May, 2007, after Killinger faked that quarter where he moved credit card reserves to earnings – burning the seed corn to bump the dividend.

    They really only started their collapse, as I’m remembering, in late September of that year. The bulk of my bear spread expired that month. I left a lot of money on the table picking the wrong instrument.

  4. Pat Shuff says:

    Under former CEO Kerry Killinger, WaMu had written subprime and option-ARM loans to hundreds of thousands of home buyers with shaky credit, particularly in California. The loans generated healthy fees, and the bank could offload the risk by selling them to firms that turned them into mortgage-backed securities. But when the market for those securities crashed along with the housing market in mid-2007 and borrowers were foreclosed on, WaMu and other banks were left holding large numbers of bad loans. WaMu all but stopped writing these sorts of loans in late 2007, but it was too late. At the end of June 2008, there were still $69 billion of them on WaMu’s books—58 percent of all its home loans.

    ~~~~~~~~~~~~~~~~~~~

    Despite this forum and proprietor’s differing view, it must be said–Wall Street greed and politician’s depravity have always existed, but this time an uncritical view of diversity let them both out of their cages at the same time.

  5. HROLLER says:

    Wamu TRUTH…

    Please, take some time and read these documents. They are a bit long but well worth the read. Don’t you wonder why the main stream media doesn’t mention the suppose “failure” of the largest financial institution in America? Wamu was a 100+ year old company…..Here is a link to all documents filed through the BK Court;

    http://www.kccllc.net/wamu

    Jamie Dimon planted “moles” in Wamu??? JPMorgan committed corporate fraud???

    http://www.kccllc.net/documents/0812229/0812229090501000000000002.pdf

    Wamu’s claims against JPMorgan/Chase;

    http://wmish.com/doc/gov/0603/JPM_V_WMI_-_ANSWER.PDF

    I’m also enclosing another link that quotes Judge Hughes from a case against the FDIC that was wrapped up on August 24, 2005; http://blog.kir.com/archives/2005/08/judge_hughes_ha.asp

    “The record shows that the swap was the only reason for this suit. It also shows that the FDIC knew that it had no factual or legal basis for its claims, and that its cases here and in Washington were shams.”

    As usual, Judge Hughes is acerbic in his opinion regarding the FDIC’s conduct, noting in particular that FDIC officials “lied about it all under oath” and they “discarded the mantle of the American Republic for the cloak of a secret society of extortionists.”

    “It’s hard to find a word that captures the essence of the FDIC’s bringing this action. Irresponsible is close. Arbitrary, dishonest, exploitative, extortionate, and abusive all fit.”

    Judge Hughes concluded that Hurwitz and Maxxam “will recover their costs because the record reveals corrupt individuals within a corrupt agency with corrupt influences on it, bringing this litigation.”

  6. David Merkel says:

    Talked with several industry insiders — they both felt that Wamu was leading the race to the bottom in underwriting. They would have died eventually; it was just a question of when and how.