Collapse still haunts former WaMu workers
One year after Washington Mutual became the largest bank in U.S. history to fail, former employees are still grappling with unanswered questions.
Seattle Times staff reporter
One year after Washington Mutual became the largest bank in U.S. history to fail, former employees are still grappling with questions about their own actions, the motives of top executives and the folly of a nation gripped by a housing boom.
The spectacular fall of WaMu has left a hole in the heart of Seattle and reverberated across the country. Once a small local thrift, WaMu rose to become a national highflier with more than $300 billion in assets. Its crash cost 18,000 people their jobs, including nearly 4,000 at the headquarters in Seattle. The bank's shareholders were wiped out.
To mark the anniversary of WaMu's collapse, The Seattle Times caught up with former employees from Seattle, California and Chicago, who saw problems behind the scenes before the final days.
Those "WaMulians," like many others, are attempting to build new lives today as their careers take some unexpected twists.
IRIS GLAZE could stake a claim to the title of WaMu's most sociable employee. She loves chatting, and eventually that became part of her job description. Hired at the Seattle headquarters in 1990, Glaze hit her stride in investor relations. A big part of her job was to take calls from the thousands of "Ma and Pa" shareholders who considered WaMu a safe investment.
Glaze would dispense advice about reinvesting dividends, talk about the company's prospects and generally reassure her callers. She also helped organize the annual shareholders meetings, attended by hundreds, at which CEO Kerry Killinger was revered as a kind of guru.
"The annual meetings, for years, were lovefests," she says. "People were very happy with the share value growing and growing and growing."
During the 1990s, the bank's headquarters staff was like one big family, Glaze says. She'd take cookies up to Killinger and the other top executives, and chat with them about their grandchildren.
But this decade, she says, the mood changed. Killinger hired a new cadre of hard-nosed executives. Their offices were redesigned, with frosted-glass windows and security staff.
By the end of 2007, the cracks in the company were impossible to ignore. WaMu announced it would lay off staff and slash its quarterly dividend from 56 cents per share to 15 cents per share.
One 90-year-old stockholder called Glaze to complain about the dividend cut. Glaze told the woman WaMu was doing everything it could to weather the economic downturn.
"You don't understand," the woman replied. "I survive on these quarterly dividends. This is what I live on."
In April 2008, with WaMu's share price down to the low teens from $40 the previous year, the bank spurned an $8-a-share takeover bid from JPMorgan Chase. Instead, it accepted a $7 billion cash infusion from a private investor group.
Glaze says those arrangements were chaotic. In the rush to design, print and ship new stock certificates to the investors in New York, one certificate worth hundreds of millions of dollars was left behind in Pittsburgh. Glaze managed to deliver the certificate by borrowing another bank's private jet.
Meanwhile, the mood of the small investors was turning from sour to abusive. By the summer of 2008, Glaze quit taking their calls, responding only to e-mails.
"I couldn't tell them anymore that it was fine and dandy and to just hang in there," she says. "I couldn't do it. I lost my charm on the phone, I lost my ability to make them feel better ... It broke my heart."
In the final weeks, staff noticed the constant delegations of suits coming and going. Something was up. On the morning of Sept. 25, WaMu was abuzz with rumors, but nobody knew anything for sure.
By the evening, it was all over the news. Federal regulators had seized the company's banking units and sold them to Chase for a paltry $1.9 billion.
Glaze's instructions from the new owners came the next day: Don't take any more calls from stockholders. Don't e-mail them. Don't fax them. Don't try to contact them in any manner. Refer all stockholder questions to a firm in New York.
So Glaze and her colleagues continued to show up to work, day after day, with nothing left to do. They drifted like this until the end of January, when they were laid off. After believing she'd retire at WaMu, Glaze found herself, in her late-50s, looking for a new job in a terrible market.
On the good days, she realizes how lucky she is to have supportive family around her, to have a loving boyfriend, to have her home. On her bad days, she'll come across some article on age bias, or realize the word "schmooze" — her forte — just doesn't appear in any job descriptions.
"When you are with one company for 18 years, you get to know everybody and everything. I loved my job, just absolutely loved it," she says. "You don't realize that so much of your self-esteem, so much of your being, is wrapped up in what you do."
JAMES MEACHAM was at ground zero for some of Washington Mutual's most questionable home loans. He wasn't a typical banking executive — he had a master's degree in theology and had spent time as a minister. He was hired in Seattle in 2000 and rose to become a vice president of business strategy at WaMu's Long Beach Mortgage division. Based in California, the division specialized in subprime mortgages, made to those with flawed credit histories.
On a gut level, Meacham says, the packages of loans that Long Beach and WaMu began bundling and selling to investment banks didn't make sense. But those loans held the lure of bigger profits for everyone, and the investment banks couldn't seem to get enough of them.
"There are times that I think that I should have spoken up more when things didn't seem right to me," he says. "On the other hand, I'm not sure it would have helped any."
There was the pressure from his superiors at WaMu to grow the business rapidly, he says. There were the mathematical formulas and financial projections that showed bundling all those risky mortgages would turn out just fine. And there was a sense that the rules of the game had changed.
"The basic problem was the assumption that housing prices would always go up," Meacham says. "It was an egregious error."
Meacham, now 44, was one of several executives laid off at Long Beach at the end of 2005, as the bank reorganized that division. WaMu's subprime loans would turn out to be poison.
Meacham says he could see the housing crash coming, and sold his California home in 2006 at the peak of the market: "It didn't take a financial genius to work out that blue-collar workers can't be paying $3,000 a month for their houses," he says.
He has wrestled with the question of who was primarily to blame for the mess. Was it lenders like WaMu? The investment banks? The global housing boom? He wonders if there is a point where credulity, and belief in a system, become culpability.
Since working at WaMu, Meacham has been doing some business consulting. But last month he changed direction. He submitted a proposal to the University of Manchester Business School in England to complete a doctoral degree in business ethics.
"As I began my steep climb to corporate management, I found new ethical challenges," Meacham wrote in his doctoral proposal. "The higher the stakes, the more pressure there seemed to be to achieve business results at any cost."
While there may be systemic reasons why people get greedy, that's not as interesting to me as why people who are normally ethical would act, in a risky context, in ways they wouldn't otherwise."
CHAD TERRY figured someone at WaMu hadn't done their homework when he realized none of the bank's new Chicago branches came equipped with drive-through windows. After all, it was Chicago. It can get below 20 degrees in the winter. People don't want to get out of their cars.
It was 2003, and WaMu was making a big push into the Chicago retail-banking market. The company, which had successfully expanded all over the West Coast, came in with a bang, opening up more than two dozen branches. Killinger had set a national goal: 250 new branches every year.
In Chicago, there was advertising everywhere. WaMu took over Grant Park for a barbecue and free Tim McGraw concert. A Guinness World Records representative even showed up to see if it qualified as the world's biggest barbecue (it didn't).
Terry, who'd started as a teller in Southern California in 1997, thought Chicago offered him a great opportunity. Within months, he was promoted to branch manager. That first year, his branch won a company award, and Terry was flown to a WaMu gathering in Hawaii, where he was feted by top executives, including Killinger. They gave him a vase, a leather-bound folder, a golden plaque.
Terry says he remembers telling Killinger he'd never intended to be in banking, but that Killinger was creating a bank where he really wanted to work. Terry says Killinger replied: "The funny thing is, I never saw myself in banking, either." (Killinger says he doesn't recall that conversation.)
WaMu kept expanding in Chicago, eventually opening about 170 branches. But the company put them in strip malls and near grocery stores, not on prime downtown corners.
By 2006, despite all the hoopla, WaMu had only managed to grab a tiny 0.4 percent of the Chicago market.
That year, WaMu announced it was closing 28 branches in Chicago. Later, an additional 104 branches went dark.
With the Chicago retail operation in disarray, Terry's 10-year career with the bank was over by the summer of 2007. Finding another job hasn't been easy.
"Part of the problem is that Washington Mutual had such a bad reputation among its competitors in Chicago. When I go to interviews, I believe people are looking at me as a semi-banker."
Terry thinks WaMu had some great ideas and plenty of talented rank-and-file employees, some of whom he considers family. That's part of the reason he started the group WaMulians Networking on the professional networking site LinkedIn. The group has more than 5,000 members.
Terry, 32, is staying in Chicago for now. His fiancée, Lizette Rubio, who also worked at WaMu, managed to get a job with Chase. Even if they wanted to, Terry says, they'd find it hard to move — because of the housing crash, their condo is underwater.
TOM MCINTIRE has been able to spend more time on his passion since being laid off by WaMu.
Hired over the phone in 2002 as an assistant Web editor, McIntire realized the company was struggling to integrate the many financial institutions it had gobbled up during its rapid expansion.
Every group, it seemed, ran on a different computer system, and nobody could communicate easily. McIntire figured maybe this was normal at such a large company.
In 2004, WaMu ran an employee film competition. The idea was to make a short "WaMovie" about an obstacle employees had overcome, with the finalists to be shown at the annual conference for managers and executives.
McIntire had long been enthusiastic about acting and film, so he shot a short film about getting clients to save paper by using e-mail. The film was chosen as a finalist.
McIntire, now 52, was inspired and started doing more film work in his spare time.
When he was laid off in June 2008, he invested all of his severance, along with the money he got from selling his Prius, into a 25-minute short film, "Greenspoke."
This month, the film debuted at the Seattle Bumbershoot festival. It's a sci-fi thriller, but maybe it's not so far removed from last year's financial collapse.
It's about what happens when an artificial organism designed to save everybody starts running amok and harming those it's supposed to help.
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