The biggest single bank casualty of the 2008 financial meltdown was Washington Mutual, and Kirsten Grind chronicled its fall for the Puget Sound Business Journal, coverage that earned her a place on the Pulitzer shortlist. Now, in The Lost Bank, she traces the bank's long history.
Washington Mutual was a no-frills institution that shepherded its customers' savings, helped them buy their homes on fixed-rate long-term mortgages, knew them by name. When Kerry Killinger took over as CEO in 1990, WaMu was a very profitable stock corporation. Killington vastly increased the bank's participation in writing sub-prime mortgages to questionable borrowers, then resold those mortgages to Wall Street investors. The bank's stock price rapidly rose, and Killington was named Banker of the Year in 2001.
But by 2008, nobody on Wall Street would touch WaMu when it desperately needed a buyer or capital investment. Bad loans, bad news and bad PR turned customer worry into a major run on deposits. The FDIC stepped in and closed the bank, selling selected branches and assets to JP Morgan on the cheap.
Grind's story has moments of humor and a broad cast of characters--and though we already know how it is going to end, the tragedy is moving. While the trend is to blame the financial meltdown on Wall Street, Grind shows us how a plethora of dysfunctional government agencies, coupled with a policy encouraging homeownership for all and investors chasing high yields no matter the risk, contributed just as much. --Bruce Jacobs, founding partner, Watermark Books & Cafe, Wichita, Kan.