The Lost Bank: The Story of Washington Mutual-The Biggest Bank Failure in American History

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The Lost Bank: The Story of Washington Mutual-The Biggest Bank Failure in American History

by Kirsten Grind (Goodreads Author)

4.02 of 5 stars 4.02 · rating details · 94 ratings · 36 reviews

During the most dizzying days of the financial crisis, Washington Mutual, a bank with hundreds of billions of dollars in its coffers, suffered a crippling bank run. The story of its final, brutal collapse in the autumn of 2008, and its controversial sale to JPMorgan Chase, is an astonishing account of how one bank lost itself to greed and mismanagement, and how the entire...more During the most dizzying days of the financial crisis, Washington Mutual, a bank with hundreds of billions of dollars in its coffers, suffered a crippling bank run. The story of its final, brutal collapse in the autumn of 2008, and its controversial sale to JPMorgan Chase, is an astonishing account of how one bank lost itself to greed and mismanagement, and how the entire financial industry—and even the entire country— lost its way as well. Kirsten Grind’s The Lost Bank is a magisterial and gripping account of these events, tracing the cultural shifts, the cockamamie financial engineering, and the hubris and avarice that made this incredible story possible. The men and women who become the central players in this tragedy— the regulators and the bankers, the home buyers and the lenders, the number crunchers and the shareholders—are heroes and villains, perpetrators and victims, often switching roles with one another as the drama unfolds.

As a reporter at the time for the Puget Sound Business Journal, Grind covered a story set far from the epicenters of finance and media. It happened largely in places such as the suburban homes of central California and the office buildings of Seattle, but Grind covered the story from the beginning, and the clarity and persistence of her reporting earned her many awards, including being named a finalist for the Pulitzer Prize and the Gerald Loeb Award. She takes readers into boardrooms and bedrooms, revealing the power struggles that pitted regulators at the Office of Thrift Supervision and the FDIC against one another and the predatory negotiations of investment bankers and lawyers who enriched themselves during the bank’s rise and then devoured the decimated bank in its final days.

Written as compellingly as the finest fiction, The Lost Bank makes it clear that the collapse of Washington Mutual was not just the largest bank failure in American history. It is a story of talismanic qualities, reflecting the incredible rise and the precipitous collapse of not only an institution but of trust, fortunes, and the marketplaces for risk across the world.(less)

Hardcover, 400 pages

Published June 12th 2012 by Simon & Schuster

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Jan 26, 2013 Ku rated it 4 of 5 stars

THE LOST BANK tells the story of biggest bank failure in this country's history and it tells it well. It compliments TOO BIG TO FAIL. In TOO BIG, that book tells the story of the flashy investment bankers of Wall Street as they fight for their financial lives, and it features dramatic story lines and outsized egos. In THE LOST BANK, it's the story of Main Street, of homeowners and mortgages and local branches where people put their savings. This book presents a scenario that the housing bubble w...more

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Nov 28, 2012 Breakingviews rated it 3 of 5 stars

Review by Antony Currie

All financial institutions - not just those deemed too big to fail - need strong regulatory oversight. That is one lesson of Kirsten Grind’s new book about the demise of Washington Mutual, “The Lost Bank.” Grind, who covered the bank for Seattle’s Puget Sound Business Journal before moving to the Wall Street Journal, offers decent coverage of the bank’s demise in September 2008. But her incredibly well-researched account of how the bank got there is more captivating.

The s...more Review by Antony Currie

All financial institutions - not just those deemed too big to fail - need strong regulatory oversight. That is one lesson of Kirsten Grind’s new book about the demise of Washington Mutual, “The Lost Bank.” Grind, who covered the bank for Seattle’s Puget Sound Business Journal before moving to the Wall Street Journal, offers decent coverage of the bank’s demise in September 2008. But her incredibly well-researched account of how the bank got there is more captivating.

The story begins in 1981 when lawyer Lou Popper, one of the firm’s directors, reluctantly agreed to run the Savings and Loan after it almost imploded. Over the next nine years he rebuilt WaMu’s reputation and restored employees’ pride - largely by being a principled, hands-on chief who mucked in with the workers and stuck to the basics of banking.

His hand-picked successor, Kerry Killinger, seemed just the man to keep WaMu on the straight and narrow. He lacked his patron’s people skills, but was studied and cautious, avoiding ostentatious clothes, cars and houses. He balked at any unnecessary expenses. from lavish lunches on the company dime to corporate jets. A favorite saying was “check your ego at the door.”

But Killinger quickly decided to impose his own stamp on the company by going on an acquisition spree. There was good strategic logic. In the fragmented U.S. banking sector, well-managed mergers could cut costs, improve margins and offer more services to clients. But getting bigger can make executives cocky. Craig Tall, who ran the M&A effort, started seeing all deals, big or small, as essentially the same aside from the number of zeroes on the check. At one point he even started to decide how much to offer by pulling a number out of a hat.

By the end of the millennium, Killinger had taken WaMu’s assets up to $150 billion - a 21-fold increase in nine years - and was hungry for more. He moved the headquarters into a plush new skyscraper, started using a corporate jet - though would rarely allow other executives to - and started wearing snappier clothes. He became best buddies with Lehman Brothers’ Dick Fuld and began hanging out at high-profile events like Davos.

Management suffered. Killinger loathed conflict and hated making difficult decisions, but spent less and less time in the office and refused to appoint a president or chief operating officer. Despite a well-deserved reputation for integrating acquired retail banks, WaMu continually put off consolidating as many as 12 mortgage platforms. By 2008, the bank often couldn’t even measure, for example, borrowers’ loan-to-value, or how many home loans customers might have. The attitude toward risk control is best expressed by a risk manager’s instruction to her staff: stop acting like a “regulatory burden” and instead become a “customer service” to support the bank’s growth.

Killinger’s ambition was to make WaMu the nation’s largest mortgage lender. That led him to stick with a five-year plan to increase higher-risk lending well into 2007, despite a 2003 internal probe which showed that only a quarter of WaMu’s subprime loans were any good, and despite multiple statements from 2004 onwards, including his own, that mortgage markets could be in a bubble.

The board of directors didn’t restrain Killinger’s ego. He had them eating out of his hand and for most of his tenure only one of them had any banking experience. The board only managed to fire him a few weeks before the FDIC moved in. At times during his 18 years running the firm, said a colleague, he looked “like a sweet old lady who owns a giant Rottweiler.” Little wonder that in the end he couldn’t keep the dog under control.

Grind’s narrative could be a tad clearer on the timeline and she tends to overdo some of the anecdotes. But it’s a compelling read that should serve as a cautionary tale for bankers, shareholders and regulators alike of how ego, mismanagement, groupthink and greed can undermine even the healthiest franchise.(less)

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May 13, 2013 Liam rated it 5 of 5 stars

"'Business got casual when dress got casual.'" (quoting Kerry Killinger, 51)

"Killinger would later refer to the Countrywide chief executive [Angelo Mozilo] in an e-mail as the 'great orange-skinned prophet from Calabasas.'" (127)

"'I was trying to torture them [JP Morgan] -- to smoke them out,' Fishman said later. 'They're torturing me, I'm torturing them. Everyone thinks we're kind of muttonheads. You're playing a weak hand, the world's coming to an end, and you're trying to run an auction on a...more

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Oct 17, 2012 Jane rated it 4 of 5 stars

Shelves: finance

I was on the fence about the rating for this book. It has two shortcomings in my opinion. One is that it suffers from a regional bias. To be fair, it is unlikely any other journalist could have covered WaMu's story in such depth. The other problem I had with it was the lack of any mention of the bank's auditors. Where were the auditors while WaMu was selling out its shareholders? Perhaps the author did not consider it relevant but American shareholder's should. I for one plan to consider the aud...more

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Jun 19, 2012 Chad rated it 5 of 5 stars

Shelves: business-leadership, economics, financial-industry

Being a ten year veteran of WaMu and having spoken with many people in many different parts of the bank since it's failure, having followed much of what has been written about the events and my own experiences, I have to say that this book tracks very closely with what I was able to piece together as to the eventual failure of WaMu. In this, it appears that it is very reliable and accurate with only very minor nuances that maybe were not fully fleshed out or understood. Given my knowledge of the...more Being a ten year veteran of WaMu and having spoken with many people in many different parts of the bank since it's failure, having followed much of what has been written about the events and my own experiences, I have to say that this book tracks very closely with what I was able to piece together as to the eventual failure of WaMu. In this, it appears that it is very reliable and accurate with only very minor nuances that maybe were not fully fleshed out or understood. Given my knowledge of the events, I was not sure how much 'new' information I would find but I certainly did. There were times that things were made more complete of a picture for me (as the account of the daily final run on the bank), things that gave insight into the higher levels of the company (such as the lack of leadership fortitude of Killinger), and things that were down right surprising (such as the deal that almost was made for Countrywide and the discussion of buying New Century). Overall, this is a great resource for someone that is interested in knowing about the death of WaMu or getting another look into what became the Credit Crisis and eventually the Great Recession.

It is clear that ultimately the fate of WaMu was in the hands of the board and management of WaMu. The coupling of errors in judgement (an ever increasing appetite for riskier loans even in the face of a deteriorating housing market) and failures of leadership, management, and oversight (as is the case with an out of control Home Lending Group) eventually positioned the bank to the position that it was in danger. It also seems though that even with the events that unfolded, the seizure of WaMu did not have to happen or at least not in the timing that it did. This seems to me to be because of numerous errors and agendas that were at play, from a CEO who did not provide adequate leadership, to a weak OTS, an incompetent and aggressive FDIC, undermining by a cut throat group of executives at Chase, and generally a bias of those in decision making circles that WaMu was not worth saving (largely due to the fact that WaMu was a consumer based company and not entangled in all of the exotic products that fueled the bubble much more so than Option ARMs ever could on their own- e.g. MBS, COD, etc). On a personal note, I remember being at a State of the Group meeting and listening to Rotella outline how we were going to focus more on 'higher margin loans' (i.e. sub prime, equity, etc). This was in early 2006, and at the time I was thinking "That does not make sense, the housing market is slowing and declining" but eventually I thought "Well, they are smart people and know more than I do". This forever will be a lesson to me- trust myself and never think others are so smart that it cancels my own good sense and judgement.

It is amazing how one little public letter by a Senator can set in motion so much devastation. Sure, one could argue that the devastation would have happened at some point because of the poor decisions and execution made in lending practices and not to mention the exotic products fueling the housing boom but in banking, one can not underestimate the importance of confidence. The lack of which can destroy banks. Schumer sent in motion the failure of Indymac. Most likely Indymac would have failed but not when it did and not in such a horrific fashion, if not for Schumer's letter. This in turn not only put pressure on WaMu in the first run on deposits but it also did two important things: 1) Put in the mind of deposit holders the long lines and frustration of account holders unable to access their money and 2) sending the media off in a frenzy of constantly asking 'who is next to fail'? The eyes of the media landed on WaMu (at WaMu's own fault) and that energized account holders to panic and withdraw money that was FDIC insured. As the previous failures of Indymac, Bear Stearns, and a host of smaller mortgage lenders increased the problems that lead to the Credit Crisis, so did the failure of WaMu increase it further leading to the failure of Lehman Brothers and eventually a near complete meltdown of the world's financial markets. The jumbled and mishandling of these events (having to do with WaMu and others) is amazing. To hear people like Bair thing that they did well and the WaMu seizure was not even a 'blip' is mind blowing in how they fail to see the big picture.

I was struck by how inept Killinger was to manage crisis. We are given a picture of a person who is completely unable to accept and act on things that need to be confronted and changed. It is too bad that the first real crisis that severely required a CEO able to navigate in crisis was one of the biggest the company ever saw and likely due to his inability to lead, the company paid the ultimate price. However, it is clear that the failure of a strong board acting as trustees of the company enabled the management team to increasingly bumble through acquisitions, increasing consumption of bad loans and eventually waiting much too late to make a change at the top. One has to wonder what Fishman would have been able to do if he had been brought in much earlier.

There is a story here that if you are not a WaMulian, you could miss. It is that where the company was built on such a strong foundation and inspired such heartfelt loyalty that it pains ex-employees to think of the failure even today (how many employees of Indymac or Lehman Brothers do you think actually cared about the company and were sad to see the companies demise versus their own career/financial situations?). The 'old guard' was moved out and the new executives were brought in. Pretty much everyone at all corners of the bank could feel this tension and could feel the change of the culture. Simply put, a lot of these new executives just simply were not good organizational fits to what WaMu was. They further corrupted the company as it was lead down a path of eventual extinction. One very graphic way to see this is how none of these 'newer' executives contributed to the Alumni fund when asked. That just does not seem to fit the brand attributes of 'fair, caring and human' that was the lifeblood of the company.

The one area that I think Grind has left unanswered and only lightly touches on is the roles of Chase executives in undermining WaMu. In several occasions she seems to hint at possible unethical and perhaps even criminal activity but backs away with footnotes saying that nothing was proven. I think that there is enough that has not been answered for an investigative journalist to further dig into this story. It is, in my view, unacceptable with how much circumstantial evidence there is about Chase's involvement (such as remembering going to a cab to a meeting but having no memory of the meeting at all) and the FDIC's absolute refusal to show any amount of transparency (as providing the heavily redacted documentations). It just seems that too many in the 'club' have too much interest in not letting people really know what they did and how they did it.

Overall, it is a good and easy read. It is a book that I would recommend.

(less)

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Mar 09, 2013 Cheryl Knowlton rated it 5 of 5 stars

My husband and I listened to this audio book as we took a lengthy driving trip. We were both riveted!! This book was recommended to me by a good friend. I thought I knew the mortgage meltdown from most angles, as I've read at least 10 books on the subject. How wrong I was! I was missing the WAMU'S piece entirely.

Having lived in the mortgage world from 1999-2008 as a mortgage broker as well as a wholesale account executive from 2003-2005, this book brought back many memories, as well as a fair a...more

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Jul 17, 2012 Robert Boyd rated it 4 of 5 stars

Shelves: finance, business

An ok job--it tells the story at a rapid clip. Grind is hampered by a lack of good sourcing--so many people would not speak with her, and insanely, a lot of correspondence between the FDIC, WaMu, JP Morgan and the now defunct and discredited OTC have been redacted, as if they were from the CIA. Still, there is enough here to show that the top guys at WaMu were liars, were reckless with OPM, turned the other way so as not to witness fraud being committed by their employees and agents, etc. The on...more

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Sep 22, 2012 April rated it 4 of 5 stars

Kristen Grind did ALOT of research and has written it in simple english, not alot of finance phrases that us normal people don't understand. :)

I was surprised to see people I know/knew quoted.

Kristen also writes about Doug Wisdorf, his career and his suicide.
"Wisdorf, like Glaze, was a longtime WaMu employee. He had worked at the bank for more than two decades and had even met his wife at WaMu."

"...Doug Wisdorf, the deputy in charge of WaMu's investor relations department, had committed suicid...more

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Mar 17, 2013 Sauparna Sarkar rated it 3 of 5 stars

For a former employee, a revealing but depressing read. A very well researched book, it provides a great historical background of the rise of the company and how market forces changed the company culture as management turned aggressive in the rush for higher margin products and ignored numerous warning signs. What was revealing to me was how early on these warning signs were exposed, but how clueless most people inside the company were about the issues. It was also disappointing to read how in-f...more

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Aug 11, 2012 Matt Beckwith rated it 5 of 5 stars

This was a very difficult book to read. Difficult, but wonderful. Working at WaMu after leaving Providian, only to return back to Providian and then be acquired by WaMu, it was very interesting to read. Heartbreaking for sure. I was very proud to have been a part of WaMu and was devastated by the company's collapse. Hearing the story from this perspective was, dare I say, therapeutic.

Opening the book with D-Day, 9/25/2008 was powerful. Coming back to it near the end still sent chills down my sp...more

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Jan 14, 2013 Nancy rated it 4 of 5 stars

Shelves: 2012, non-fiction

Worth reading, though it's likely that you'll get angry while reading it. The willful ignorance, the willful destruction, those are angering, but there's also the people who never knew, the ones who couldn't have seen things coming (mostly the shareholders), the people who were in-house and kept in the dark or had been in house for so many years and love the old WaMu so much they couldn't give it up. It's very well-written, very clear, and very sad.

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Jul 28, 2012 Jeffery rated it 4 of 5 stars

This book tells the inside story of WaMu from the savings and loan crisis of the 80's til the failure of the bank in 2008. If you wondered what led banks to make stupid decisions regarding mortgages this book fills you in. The author did a very good job showing this bank not as a huge corporation but as a group of people that changed the trajectory of the bank from a sound people oriented bank to a grow at all cost financial machine. A lot of research went into this book. I recommend it highly.

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Jun 16, 2012 Lincoln rated it 3 of 5 stars

This is a great book for the first 75% where the reporting is detailed, insightful and clearly with inside the bank knowledge. But once we get to 2008, the details become lighter and the specific dynamics of board room negotiations I totally lacking. The author has a great pulse on what happened in Seattle and at WaMu but no insider status in washington or new York. A good read and history of WaMu but the last part of the book is thin and disappointing.

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Jul 05, 2012 Ken rated it 5 of 5 stars

Shelves: financial-crisis

This was one of the more interesting books that I've read about the financial crisis. The book deals exclusively with the experience of Washington Mutual, covering its long road from a local bank to one of the largest mortgage lenders in the country. The book does a good job of explaining how the personalities of those running the company changed the bank's culture and led it to make increasingly risky loans. This is a major advantage of the book, as most other books about the financial crisis s...more

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Aug 22, 2012 James rated it 4 of 5 stars

This book is fantastic, in a Greek tragedy kind of way. Grind does a superb job mapping the rise and fall of WaMu through unchecked subprime lending.

Where this book really excels though is painting the broader picture of WaMu's failure, and the greater market and the actions of federal regulators. WaMu did not fail because of subprime loans, it failed because every chance it had for raising capital or finding a buyer was systematically taken away from it, until it was sold in a fire sale to JPM...more

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Jun 13, 2012 Huntley added it

If you are ready to relive (and better understand) the 2008 meltdown, you should pick this up. It's written by a reporter who worked for our company at the time (she's at the WSJ) now. Her work on WaMu made her a finalist for the Pulitzer. Just getting into the book myself -- it's really good, if depressing.

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Feb 06, 2013 Katie Postlewait rated it 4 of 5 stars

As a former WaMu employee, this book was extremely interesting. It shows that the way the bank went down was indeed fishy, but also goes into the background of why the executives were certainly also to blame. Crazy times.

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Mar 18, 2013 David rated it 4 of 5 stars

Nice narrative of how a good 100 yr+ old bank fails in a matter of months. Well researched. Also poses a good question as to why WaMu (and Lehman Bro) was allowed to sink while Citi was saved. Now, I need to read about jamie Dimon.

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Jan 11, 2013 Bob rated it 4 of 5 stars

Very informative demonstration of how corporate greed coupled with a lack of (dare I say the word without reveling my political leaning)government regulation can reek havoc.

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Oct 12, 2012 Tory Stewart rated it 4 of 5 stars

A bit of a slog, but not because it's badly written but because you know how it's going to turn out! The author had a lot of access and explains the fall of this bank very well.

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Apr 24, 2013 Don Libes rated it 5 of 5 stars

Very well-written narrative of the history of WaMu and other players (regulators, banks, etc.) in the 2008 mortgage debacle. (For those who forget, WaMu was the largest bank until it gained the title of the largest bank failure.)

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Dec 31, 2012 Lisa rated it 4 of 5 stars

As a former Wamulian I had to read this. It was well researched, some of the dates seemed wrong, but fascinating to read the demise from afar rather than in it.

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May 17, 2013 Marc Dukes rated it 4 of 5 stars

Sheila Bair looks pretty bad in this book. WaMu was hoard up big time, but the contention that the FDIC collaborated with Chase to accelerate its demise may have a kernel of truth.

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Feb 27, 2013 Ariadna73 rated it 3 of 5 stars

Shelves: chronics, economy, history

This book tells the detailed story of the Washington Mutual debacle. There are no surprises in it: the rich got richer; and the poor got poorer. So sad...

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Jul 30, 2012 Erica rated it 3 of 5 stars

Horrifying account of the sub-prime banking crisis through the lens of WaMu. The writing isn't great, but it's a compelling story.

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Feb 02, 2013 Marggie Skinner rated it 4 of 5 stars

A very well researched and well told story about the actions that led up to the failure if Washington Mutual Bank.

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Jul 26, 2012 Jillian rated it 5 of 5 stars

What a great book. It was well written and I learned an awful lot about Option ARM loans. Good detective work, good writing, good story, and great objectivity.

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Jul 01, 2012 Lesley rated it 5 of 5 stars

Shelves: non-fiction

Excellent easily understood account of the implosive fall of WaMu from a combination of greed, hubris and appallingly weak leadership. Read it and weep for the future of US economy

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Feb 02, 2013 Luaba rated it 4 of 5 stars

Shelves: economy

A great complimentary book to "Too Big To Fail" (not the same author just same genre).

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Jan 08, 2013 Tomraabe rated it 4 of 5 stars

This is a very interesting book and well presented. Very much a cautionary tale!

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About Kirsten Grind

I live in New York City, but I'm a West Coaster at heart. I love the outdoors - running, biking, hiking, backpacking - and I am deeply obsessed with the ocean, particularly Swami's in Cardiff, Calif. I've always been a newspaper journalist, covering a variety of business topics until I landed on finance, now at The Wall Street Journal. I am a huge bookworm - when I was 13, my father feared I was o...more

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