Washington Mutual

» see wamu.com as it lived, on the wayback machine

~ the obit ~

The Great Seattle Fire took 120 acres of downtown on 6 June 1889. Three and a half months later, on 25 September, the Washington National Building Loan and Investment Association filed its articles of incorporation to lend money to people putting the city back up. It made the first home mortgage loan on the West Coast on 10 February 1890 and converted to a mutual savings bank in 1917. Then it spent most of the twentieth century as a regional institution that did not do anything interesting.

Kerry Killinger took over in 1990 and started buying. Great Western Financial went in 1997 and H.F. Ahmanson, which owned Home Savings of America, went the year after, and those two deals alone made WaMu one of the largest thrifts in the country. Dime Bancorp followed in 2002 and the credit card issuer Providian in 2005. Somewhere in the middle of that, in 1999, it bought a Californian subprime lender called Long Beach Mortgage, and that is the acquisition that mattered.

The loan book by the mid 2000s was heavy with option ARMs, the kind of mortgage where the borrower picks a payment small enough that the balance goes up rather than down. It worked while house prices rose. When they stopped, the bank was holding paper against houses worth less than the paper, and everyone who looked at the balance sheet could see it. Killinger was dismissed on 8 September 2008. His replacement, Alan Fishman, was in the job for seventeen days.

The mechanism itself was not exotic to anyone reading from here. Turkey had already run this film. Fourteen banks were transferred to the savings deposit insurance fund between 2000 and 2003, Demirbank among them on 6 December 2000, and the name of that fund became ordinary speech during the 2001 crisis. So the American version arriving in 2008 looked less like a novelty than like a much larger instance of something the news here had already had to explain to everybody once.

~ the rap sheet ~

~ the power of yes ~

WaMu spent the 2000s marketing itself against the whole idea of a bank. The slogan was The Power of Yes. The advertising put a row of grey-suited bankers on screen to be laughed at, and the branches were redesigned into a format called Occasio with no teller windows in them, just staff standing at podiums in an open room. Free checking with no minimum balance was the product that pulled people in, and it worked: the retail deposit base was real money from ordinary customers, which is exactly what made the run so damaging when it started.

The bank also had a stadium-grade nickname and used it everywhere. WaMu was on the signage and on the tower in downtown Seattle, and the advertising ended on a cheer. Reading the campaign back against what the lending side was writing in the same years is uncomfortable in a way that the collapse itself is not.

~ nine days in September ~

Lehman Brothers filed for bankruptcy on 15 September 2008. Depositors started pulling money out of WaMu the same week, and by 24 September they had taken $16.7 billion, about nine percent of what the bank had held at the end of June. A thrift cannot survive that arithmetic and the regulators knew it.

On the evening of Thursday 25 September, after business hours on the West Coast, the Office of Thrift Supervision closed the bank and appointed the FDIC as receiver. The FDIC sold the banking operations to JPMorgan Chase the same night for $1.888 billion. Depositors lost nothing and the insurance fund paid nothing, which is the part regulators point at. Shareholders and bondholders were wiped out, and the holding company filed for Chapter 11 in Delaware the next day, the second largest bankruptcy in American history behind the one that had started the run nine days earlier.

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