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Killinger Forced Out at Washington Mutual

Published 09/08/08 Craig Harrington - Print Article
E-mail - editor@economyincisis.org

Washington Mutual, the nation’s largest savings and loan operation, replaced Kerry K. Killinger in its latest attempt to catch up to the credit crisis which has left it reeling, according to The New York Times.

Washington Mutual was devastated by the sub-prime crisis and was a major lender to urban and lower-income borrowers across the country. The Seattle-based giant has seen share prices fall by nearly 88 percent in the past 52 weeks.

Killinger proved himself incapable of leading the company through the sub-prime crisis and was widely blamed for Washington Mutual’s involvement with bad debt and troubled mortgages, according to The Seattle Times.

Killinger’s ouster from Washington Mutual marks yet another CEO dismissal in what has been a tumultuous year. The heads of Citigroup, Merrill Lynch, Wachovia and Bear Stearns have been replaced this year under the weight of incredible sub-prime debt. The heads of Fannie Mae and Freddie Mac were also removed by Secretary Henry Paulson in a Treasury Department takeover Sunday morning.

Perhaps the most troubling aspect of Killinger’s dismissal pertains to his severance package. As the executive responsible for stretching Washington Mutual beyond its limits through acquisitions, embroiling it in sub-prime debt, and forcing the institution to shed perhaps 1,200 jobs, Killinger will receive $23.5 million for his efforts. Shareholders saw their value fall from $38.32 (Sep 19, 2007) to $4.04 (Sep 5, 2008) under Killinger’s guidance, yet he stands to walk away with millions while they are left with almost nothing.

Source The New York Times:

Washington Mutual, the country’s biggest savings and loan, said Monday morning that Alan H. Fishman has been appointed chief executive, succeeding Kerry K. Killinger, who had been forced out after leading the company for 18 years.

…

Mr. Killinger had built Washington Mutual into one of the nation’s biggest financial institutions through a series of acquisitions. But his failure to properly integrate those deals and manage the growing losses from subprime mortgages and credit card loans proved to be his undoing.

…

Washington Mutual, based in Seattle, has been one of the lenders hit hardest by the downturn in the housing market. It has one of the biggest portfolios of so-called pay option mortgages, and had long focused its operations on lower-income urban borrowers. Losses at the bank have been devastating.

…

Mr. Killinger could walk away with an exit package worth as much as $23.5 million, according to an analysis by James F. Reda & Associates.

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