The executive who helped lead Washington Mutual to the biggest bank failure in U.S. history offered more accusations than apologies during testimony Tuesday in front of the Senate Subcommittee on Investigations. Kerry Killinger, who fronted WaMu for 18 years leading up to his departure weeks before the institution’s government takeover and collapse, said regulators “unfairly” seized the bank. He also said WaMu was not treated fairly by the government in comparison to East Coast banks.
Killinger Accuses Policymakers Of East Coast Bias
Killinger said WaMu’s failure could have been avoided if the U.S. Government had acted differently. He said the government’s seizure of the bank in September 2008 was “unnecessary,” and that WaMu’s capital “greatly exceeded regulatory requirements for a well-capitalized bank” at the time of the seizure.
Killinger, who personally earned $100 million between 2003 and 2008, also complained that because of its distance from Wall Street, WaMu was not offered the same protections that some larger, east-coast banks were. “[Washington Mutual] was similarly excluded from hundreds of meetings and telephone calls between Wall Street executives and policy leaders that ultimately determined the winners and losers in this financial crisis,” Killinger said.
Killinger’s prepared statement is available here.
Senate Committee Paints A Different Picture
Washington Mutual drove itself and the nation’s economy downhill by recklessly issuing high-risk loans, said a pre-hearing release from subcommittee chairman Carl Levin, D-Mich. And according to Levin, not only did WaMu issue these loans, but it encouraged its personnel to do so because it stood to make quick money from getting borrowers to pay unnecessarily high interest rates.
“WaMu’s compensation system rewarded loan officers and loan processors for originating large volumes of high-risk loans, paid extra to loan officers who overcharged borrowers or added stiff pre-payment penalties, and gave executives millions of dollars even when its high-risk lending strategy placed the bank in financial jeopardy,” read Levin’s statement.
Levin also accused Washington Mutual, under Killinger’s watch, of dropping toxic assets into the U.S. financial system.
“Washington Mutual built a conveyor belt that dumped toxic mortgage assets into the financial system like a polluter dumping poison into a river,” said Levin. “Using a toxic mix of high-risk lending, lax controls, and destructive compensation policies, Washington Mutual flooded the market with shoddy loans and securities that went bad.”