Reading between the lines of the latest Washington Mutual story by the Seattle Times’ Drew DeSilver, it sounds as if Kerry Killinger and his co-defendants tried to low-ball the FDIC in a settlement of a suit over their role in the thrift’s failure — and the government said, “no way.”
Former CEO Killinger, former Chief Operating Officer Stephen Rotella; and David Schneider, former head of WaMu’s home-loans division are named in the suit, alleging “gross mismanagement” that led to the largest banking failure in American history. As the story adds, “Killinger’s wife, Linda, and Rotella’s wife, Esther, also are named in the suit, for allegedly helping their husbands transfer homes and cash into trusts to keep them out of creditors’ hands.” What a class act.
The suit needs to proceed. The many thousands of shareholders, creditors and employees need answers on so many questions. The collapse of WaMu was not an act of God, nor were Killinger et al helpless victims. The damage done extends from lost jobs and investor wealth to the death of a very important Seattle headquarters. We need more suits, if necessary. Criminal investigations if warranted.
Based on the reporting here and elsewhere, including from Kirsten Grind at the Puget Sound Business Journal, Washington Mutual abandoned the fundamental tenets of safe and sound banking to go on a years-long spree of recklessness — one that was very profitable for the top executives. And saying, “Wall Street made me do it” just won’t wash. What did Killinger know and when did he know it? That’s just the beginning of the answers the public needs.
The banker-dominated Obama administration has shown little curiosity about the banking practices that brought on the Great Recession, a blindered approach especially prevalent in the Justice Department run by former corporate lawyer Eric Holder. That needs to change but it probably won’t. At the least, the FDIC can shed a little light. Justice? That may be asking too much. We may never know how badly regulators bungled WaMu’s emergency and why and how it was pushed into a bank run and failure while other, perhaps better connected. struggling institutions survived.
Today’s Econ Haiku:
Sun, history, piles of debt
The squealing of PIGS