Washington Mutual's former top executives testify before Senate investigative panel

It's Washington Mutual Day in Washington, D.C.

A parade of former executives from the thrift is testifying today before the Senate's Permanent Subcommittee on Investigations, chaired by Senator Carl Levin of Michigan, a tenacious truth-seeker. The subcommittee is looking into the "causes and consequences" of the Great Recession.

Currently testifying before the panel are Stephen Rotella, formerly the President and Chief Operating Officer of Washington Mutual, and Kerry K. Killinger, formerly the Chief Executive Officer and Chairman.

Killinger, readers may recall, once boasted:

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.

That was in 2003. Five years later, as Killinger had unwittingly prophesied, Washington Mutual ceased to be a bank, following its closure and seizure by the Office of Thrift Supervision, and its fire sale to JPMorgan Chase.

Killinger has said little in public since he was forced out as CEO a few weeks before WaMu's seizure, refusing to go on the record and declining interviews. Now, he'll be questioned by well briefed lawmakers seeking a better understanding of why WaMu pursued such a risky growth strategy.

Killinger, who left WaMu with a golden parachute, paid lip service to the principle of responsibility in his opening statement, and then simply want on to defend his actions as CEO and Chairman. Here's an excerpt from his opening statement:

I was an employee of Washington Mutual for more than 30 years and was honored to be its Chief Executive Officer for 18 of those years. Thanks to the efforts of tens of thousands of Washington Mutual employees, the Bank enjoyed many successes over most of my tenure as CEO as we produced solid financial results and a growing customer base, and received numerous awards for customer service and corporate philanthropy.

What about WaMu's risky growth strategy and corner-cutting? How can the decisions made in the early 2000s - which arguably led to WaMu's downfall in September 2008 - be characterized as successes? They resulted in the failure of the bank! But that's not how Killinger sees it:

The Washington Mutual Board decided to replace me with a new CEO in the beginning of September of 2008. At the time I left the Company, Washington Mutual’s capital greatly exceeded regulatory minimums, deposit flows were stable, sources of liquidity appeared satisfactory, and the OTS had not directed us to raise additional outside capital or to seek a merger partner. Because regulators normally would go through a process of escalating concerns through various directives and enforcement actions prior to taking such draconian actions as forcing the sale or seizing of a bank, I believed that the Company was in a relatively good position to survive the crisis.

So he says, but evidently the Office of Thrift Supervision felt WaMu was in danger of failing, or else the bank would not have been seized and handed over to JPMorgan Chase. Had WaMu been more competently managed, the company would not have struggled under the weight of so many risky loans following the collapse of the housing market.

We can debate whether Washington Mutual was treated fairly by OTS and the FDIC. But what Killinger can't seem to acknowledge is that WaMu would have never have found itself in dire straits if he hadn't been so greedy.

He wanted growth at any cost. He wanted profit.

Killinger says he's sorry, says he's "deeply saddened" by what happened to WaMu, but then, it's easy for him to say that. He made off with millions while WaMu's stockholders were wiped out. He escaped unscathed after running one of the Pacific Northwest's oldest institutions into the ground.