WaMu – a story of greed

Was it risky loans or greedy egos that took down Washington Mutual?

The story behind the biggest bank failure in U.S. history is the stuff best sellers are made of. Kirsten Grind, banking and finance reporter for the Puget Sound Business Journal, has a new book deal with Simon & Schuster to write “The Rise and Fall of WaMu.”

“It’s a psychological story about what happens to people, the real people that sort of build up all this power, and what it does to them and how they handle it,” Grind says. “That’s really the story of WaMu.”

Washington Mutual started in 1889 by offering loans to businesses wanting to rebuild after the Great Seattle Fire destroyed 29 square blocks of downtown Seattle. Edward Graves, a former assistant superintendent of the federal Bureau of Engraving and Printing, was the first president of the company and there was only one other employee.

For most of its 100 years in existence was a successful bank and was involved with the community, sponsoring events such as the Fourth of July fireworks show at Lake Union.

The end for WaMu began in the late 1990s, with one bad business decision to purchase Long Beach Mortgage. Grind says the mortgage company “represented the wild west out in California,” not requiring paperwork yet making a lot of risky loans. From there, greed took over at WaMu.

“The company just started gobbling up banks across the country and it grew into this massive power house bank,” she says.

The paper trail leads to the Federal Government seizing the bank in September of 2008, we know that. But the story Grind wants to tell is about the personalities involved.

“This was a bank that was know as a friend of family. It started school savings accounts across the country,” says Grind. “The story is really the contrast between the stability of goodness and then all of this out of control greed.”

Could this book turn into a movie deal? It’s possible with the way Grind talks about the lead character in the real-life drama. Kerry Killinger was a “very humble” CEO from Iowa whose personal journey mirrored what happened to the bank. He changed.

“He was this average guy who would come into a bank and make them get rid of all the corporate jets,” she says. “Then he changed as the bank grew more powerful as well.”

As recently as his April 13, 2010 testimony before the Senate Permanent Subcommittee on Investigations, Killinger said he was not to blame for the bank’s collapse, though he was “saddened” by its takeover. He believes government regulators should not have seized WaMu and sold it to JPMorgan Chase. In his testimony he claimed that WaMu’s seizure was part of a conspiracy.

WaMu fired Killinger just weeks before the bank failed and replaced him with Alan Fishman. Fishman was paid about $19 million for being on the job for three weeks.

Former Washington Mutual CEO Kerry Killinger at an April Senate hearing on the financial crisis. AP photo

The real losers in the WaMu saga were the shareholders and employees. The company’s stock price dwindled to only pennies after trading around $45 a share three years ago.

“You will never find more loyal people than those who worked at WaMu,” Grind says. “They loved their company.”

The 350 page book, documenting the people involved with the rise and fall of WaMu, is due out in February of 2012.