Washington Mutual, Inc. (Pink Sheets: WAMUQ), abbreviated to WaMu , was a savings bank holding company and the former owner of Washington Mutual Bank, which was the United States' largest savings and loan association until it became the largest bank failure in U.S. history.
On September 25, 2008, the United States Office of Thrift Supervision (OTS) seized Washington Mutual Bank from Washington Mutual, Inc. and placed it into the receivership of the Federal Deposit Insurance Corporation (FDIC). The OTS took the action due to the withdrawal of $16.4 billion in deposits, during a 10-day bank run (amounting to 9% of the deposits it had held on June 30, 2008). The FDIC sold the banking subsidiaries (minus unsecured debt or equity claims) to JPMorgan Chase for $1.9 billion, which reopened the bank's offices the next day as JPMorgan Chase branches. The holding company, Washington Mutual, Inc. was left with $33 billion assets, and $8 billion debt, after being stripped of its banking subsidiary by the FDIC. The next day, September 26, Washington Mutual, Inc. filed for Chapter 11 voluntary bankruptcy in Delaware, where it is incorporated.
Washington Mutual Bank's closure and receivership is the largest bank failure in American financial history. Before the receivership action, it was the sixth-largest bank in the United States. According to Washington Mutual Inc.'s 2007 SEC filing, the holding company held assets valued at $327.9 billion.
On 20 March 2009, Washington Mutual Inc. filed suit against the FDIC in the United States District Court for the District of Columbia, seeking damages of approximately $13 billion for what they claim to be an unjustified seizure and an extremely low sale price to JPMorgan Chase. JPMorgan Chase promptly filed a counterclaim in the Federal Bankruptcy Court in Delaware, where the Washington Mutual bankruptcy proceedings had been continuing since the Office of Thrift Supervision's seizure of the holding company's bank subsidiaries.
Business operations prior to bank receivership
Despite its name, Washington Mutual ceased being a mutual company in 1983 when it demutualized and became a public company.
As of June 30, 2008, Washington Mutual Bank had total assets of US$ 307 billion, with 2,239 retail branch offices operating in 15 states, with 4,932 ATMs, and 43,198 employees. It held liabilities in the form of deposits of $188.3 billion, and owed $82.9 billion to the Federal Home Loan Bank, and had subordinated debt of $7.8 billion. It held as assets of $118.9 billion in single-family loans, of which $52.9 billion were "option adjustable rate mortgages" (Option ARMs), with $16 billion in subprime mortgage loans, and $53.4 billion of Home Equity lines of Credit (HELOCs) and credit cards receivables of $10.6 billion. It was servicing for itself and other banks loans totaling $689.7 billion, of which $442.7 were for other banks. It had non-performing assets of $11.6 billion, including $3.23 billion in payment option ARMs and $3.0 billion in subprime mortgage loans.
On September 15, 2008, the holding company received a credit rating agency downgrade; from that date through September 24, 2008, customers withdrew $16.7 billion in deposits, which ultimately led the Office of Thrift Supervision to close the bank.
The FDIC then sold most of the bank's assets and liabilities, including secured debt to JPMorgan Chase for $1.9 billion. Claims of the subsidiary bank's equity holders, senior and subordinated debt (all primarily owned by the holding company) were not acquired by JP Morgan Chase.
History
Mutual savings bank
Washington Mutual was incorporated as the Washington National Building Loan and Investment Association on September 25, 1889, after the great Seattle fire destroyed 120 acres (0.49 km 2 ) of the central business district of Seattle. The newly formed company made its first home mortgage loan on the West Coast on February 10, 1890. It changed its name to Washington Savings and Loan Association on June 25, 1908. By 1917, it was operating under the name Washington Mutual Savings Bank . The company purchased its first company, the financially distressed Continental Mutual Savings Bank, on July 25, 1930. Its marketing slogan for much of its history was "The Friend of the Family". At the time of its demise, the slogan was "Simpler Banking, More Smiles".
Post demutualization growth
In 1983, Washington Mutual bought the brokerage firm Murphey Favre and demutualized, converting into a capital stock savings bank. By 1989, its assets had doubled. In October 2005, Washington Mutual purchased the formerly "subprime" credit card issuer Providian for approximately $6.5 billion, although Providian's new management team's strategy of targeting Prime credit card consumers had been underway since 2001, therefore the credit card unit's nonperforming loan portfolio had improved significantly prior to the company's sale to WaMu. In March 2006, Washington Mutual began the move into its new headquarters, WaMu Center, located in downtown Seattle. The company's previous headquarters, Washington Mutual Tower, stands about a block away from the new building on Second Avenue. In August 2006, Washington Mutual began using the official abbreviation of WaMu in all but legal situations.
Acquisitions
Since the acquisition of Murphey Favre, WaMu made numerous acquisitions with the aim of expanding the corporation. By acquiring companies including PNC Mortgage, Fleet Mortgage and Homeside Lending, WaMu became the third-largest mortgage lender in the U.S. With the acquisition of Providian Financial Corporation in October 2005, WaMu also became the nation's 9th-largest credit-card company.
A list of Washington Mutual acquisitions since demutualization:
- Commercial Capital Bancorp, California, 2006
- Providian Financial Corporation, California, 2005
- HomeSide Lending, Inc., Florida, a unit of National Australia Bank, 2002
- Dime Bancorp, Inc., New York, 2002
- Fleet Mortgage Corp., South Carolina, 2001
- Bank United Corp., Texas, 2001
- PNC Mortgage, Illinois, 2001
- Alta Residential Mortgage Trust, California, 2000
- Long Beach Financial Corp., California, 1999
- Industrial Bank, California, 1998
- H. F. Ahmanson & Co. (Home Savings of America), California, 1998
- Great Western Bank, 1997
- United Western Financial Group, Inc., Utah, 1997
- Keystone Holdings, Inc. (American Savings Bank), California, 1996
- Utah Federal Savings Bank, 1996
- Western Bank, Oregon, 1996
- Enterprise Bank, Washington, 1995
- Olympus Bank FSB, Utah, 1995
- Summit Savings Bank, Washington, 1994
- Far West Federal Savings Bank, Oregon, 1994
- Pacific First Bank, Ontario, 1993
- Pioneer Savings Bank, Washington, 1993
- Great Northwest Bank, Washington, 1992
- Sound Savings & Loan Association, Washington, 1991
- CrossLand Savings FSB, Utah, 1991
- Vancouver Federal Savings Bank, Washington, 1991
- Williamsburg Federal Savings Association, Utah, 1990
- Frontier Federal Savings Association, Washington, 1990
- Old Stone Bank of Washington, FSB, Rhode Island, 1990
Many of Washington Mutual's acquisitions became reviled as the rapid post-merger integrations resulted in numerous errors. The Dime merger resulted in account ownership to be split with account beneficiaries. The Fleet Mortgage merger resulted in entire loans simply disappearing—being services but unable to be found by customer service representatives.
Rise and fall
"Wal-Mart of Banking"
Chairman and CEO Kerry Killinger had pledged in 2003:
We hope to do to this industry what Wal-Mart did to theirs, Starbucks did to theirs, Costco did to theirs and Lowe's-Home Depot did to their industry. And I think if we’ve done our job, five years from now you’re not going to call us a bank.Killinger's goal was to build WaMu into the “Wal-Mart of Banking,” which would cater to lower- and middle-class consumers that other banks deemed too risky. Complex mortgages and credit cards had terms that made it easy for the least creditworthy borrowers to get financing, a strategy the bank extended in big cities, including Chicago, New York and Los Angeles. WaMu pressed sales agents to approve loans while placing less emphasis on borrowers’ incomes and assets. WaMu set up a system that enabled real estate agents to collect fees of more than $10,000 for bringing in borrowers. Variable-rate loans — Option Adjustable Rate Mortgages (Option ARMs) in particular — were especially attractive because they carried higher fees than other loans, and allowed WaMu to book profits on intere
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