At hearings of the U.S. Senate Permanent Subcommittee on Investigations looking into causes of the financial crisis, Kerry Killinger, CEO of the now-defunct bank Washington Mutual, contended that his company hadn't been treated fairly. Documents were released that disclosed how he compared liquidity—which, he complained, was provided to other banks in distress but not to WaMu— to oxygen.
Well, according to reports of the hearings, it looks more like WaMu created such a toxic, oxygen-starved control environment for itself, one so bad that you have to wonder how anyone within the organization could survive, and whether any amount of help—oxygen, liquidity, or otherwise—could have saved the company.
It's well known that years ago Washington Mutual drilled a mantra into its managers' heads: “The Power of Yes.” I say mantra because Senate testimony depicts how in at least one meeting, WaMu managers actually had to chant those words. Well, that might have been a catchy and effective marketing line, but it also seems to have been one of the root causes of a culture at WaMu that strived to generate as many mortgages as possible, quality be damned.
Senator Carl Levin, the committee chairman, put it succinctly: “Using a toxic mix of high-risk lending, lax controls, and compensation policies that rewarded quantity over quality, Washington Mutual flooded the market with shoddy loans that went bad.”
You might think that a lending institution would carefully consider the quality ...