Beautiful uncancelled certificate from the Washington Mutual
. This historic document was printed by Thomas Greg & Sons Banknote Company and has an
ornate border around it with a vignette of the company logo. This item has the printed signatures of the Company's President, Kerry Killinger and Secretary.
Washington Mutual, Inc. is a savings bank holding company and the former owner of Washington Mutual Bank, which was the United States' largest savings and loan association.
On September 25, 2008, the United States Office of Thrift Supervision (OTS) seized Washington Mutual Bank from Washington Mutual, Inc. and placed it into the receivership of the Federal Deposit Insurance Corporation (FDIC). The OTS took the action due to the withdrawal of $16.4 billion in deposits, during a 10-day bank run (amounting to 9% of the deposits it had held on June 30, 2008). The FDIC sold the banking subsidiaries (minus unsecured debt or equity claims) to JPMorgan Chase for $1.9 billion, which re-opened the bank the next day. The holding company, Washington Mutual, Inc. was left with $33 billion assets, and $8 billion debt, after being stripped of its banking subsidiary by the FDIC. The next day, September 26, Washington Mutual, Inc. filed for Chapter 11 voluntary bankruptcy in Delaware, where it is incorporated.
Washington Mutual Bank's closure and receivership is the largest bank failure in American financial history. Before the receivership action, it was the sixth-largest bank in the United States. According to Washington Mutual Inc.'s 2007 SEC filing, the holding company held assets valued at $327.9 billion.
Business operations prior to bank receivership
Despite its name, Washington Mutual ceased being a mutual company in 1983 when it demutualized and became a public company.
As of June 30, 2008, Washington Mutual Bank had total assets of US$ 307 billion, with 2,239 retail branch offices operating in 15 states, with 4,932 ATM's, and 43,198 employees. It held liabilities in the form of deposits of $188.3 billion, and owed $82.9 billion to the Federal Home Loan Bank, and had subordinated debt of $7.8 billion. It held as assets of $118.9 billion in single-family loans, of which $52.9 billion were "option adjustable rate mortgages" (Option ARMs), with $16 billion in subprime mortgage loans, and $53.4 billion of Home Equity lines of Credit (HELOCs) and credit cards receivables of $10.6 billion. It was servicing for itself and other banks loans totaling $689.7 billion, of which $442.7 were for other banks. It had non-performing assets of $11.6 billion, including $3.23 billion in payment option ARMs and $3.0 billion in subprime mortgage loans.
On September 15, 2008, the holding company received a credit rating agency downgrade, from that date through September 24, 2008, customers withdrew $16.7 billion in deposits, which ultimately led the Office of Thrift Supervision to close the bank.
The FDIC then sold most of the bank's assets and liabilities, including secured debt to JPMorgan Chase for $1.9 billion. Claims of the subsidiary bank's equity holders, senior and subordinated debt (all primarily owned by the holding company) were not acquired by JP Morgan Chase.
Washington Mutual was incorporated as the Washington National Building Loan and Investment Association on September 25, 1889, after the great Seattle fire destroyed 120 acres (0.49 km2) of the central business district of Seattle. The newly formed company made its first home mortgage loan on the West Coast on February 10, 1890. It changed its name to Washington Savings and Loan Association on June 25, 1908. By 1917, it was operating under the name Washington Mutual Savings Bank. The company purchased its first company, the financially distressed Continental Mutual Savings Bank, on July 25, 1930. Its marketing slogan for much of its history was "The Friend of the Family". At the time of its demise, the slogan was "Simpler Banking, More Smiles".
In 1983, Washington Mutual bought the brokerage firm Murphey Favre and demutualized, converting into a capital stock savings bank. By 1989, its assets had doubled. In October 2005, Washington Mutual purchased the "subprime" credit card issuer Providian for approximately $6.5 billion. In March 2006, Washington Mutual began the move into its new headquarters, WaMu Center, located in downtown Seattle. The company's previous headquarters, Washington Mutual Tower, stands about a block away from the new building on Second Avenue. In August 2006, Washington Mutual began using the official abbreviation of WaMu in all but legal situations.
Since the acquisition of Murphey Favre, WaMu made numerous acquisitions with the aim of expanding the corporation. By acquiring companies including PNC Mortgage, Fleet Mortgage and Homeside Lending, WaMu became the third-largest mortgage lender in the U.S. With the acquisition of Providian Financial Corporation in October 2005, WaMu also became the nation's 9th-largest credit-card company.
A list of Washington Mutual acquisitions since demutualization:
Commercial Capital Bancorp, California, 2006
Providian Financial Corporation, California, 2005
HomeSide Lending, Inc., Florida, a unit of National Australia Bank, 2002
Dime Bancorp, Inc., New York, 2002
Fleet Mortgage Corp., South Carolina, 2001
Bank United Corp., Texas, 2001
PNC Mortgage, Illinois, 2001
Alta Residential Mortgage Trust, California, 2000
Long Beach Financial Corp., California, 1999
Industrial Bank, California, 1998
H. F. Ahmanson & Co. (Home Savings of America), California, 1998
Great Western Bank, 1997
United Western Financial Group, Inc., Utah, 1997
Keystone Holdings, Inc. (American Savings Bank), California, 1996
Utah Federal Savings Bank, 1996
Western Bank, Oregon, 1996
Enterprise Bank, Washington, 1995
Olympus Bank FSB, Utah, 1995
Summit Savings Bank, Washington, 1994
Far West Federal Savings Bank, Oregon, 1994
Pacific First Bank, Ontario, 1993
Pioneer Savings Bank, Washington, 1993
Great Northwest Bank, Washington, 1992
Sound Savings & Loan Association, Washington, 1991
CrossLand Savings FSB, Utah, 1991
Vancouver Federal Savings Bank, Washington, 1991
Williamsburg Federal Savings Association, Utah, 1990
Frontier Federal Savings Association, Washington, 1990
Old Stone Bank of Washington, FSB, Rhode Island, 1990
"Wal-Mart of Banking"
Chairman and CEO Kerry Killinger had pledged in 2003 “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.”
Killinger's goal was to build WaMu into the “Wal-Mart of Banking,” which would cater to lower- and middle-class consumers that other banks deemed too risky. Complex mortgages and credit cards had terms that made it easy for the least creditworthy borrowers to get financing, a strategy the bank extended in big cities, including Chicago, New York and Los Angeles. WaMu pressed sales agents to pump out loans while disregarding borrowers’ incomes and assets. WaMu setup a system of dubious legality that enabled real estate agents to collect fees of more than $10,000 for bringing in borrowers, sometimes making the agents more beholden to WaMu than they were to their clients. Variable-rate loans, and Option Adjustable Rate Mortgages (Option ARMs) in particular — were especially attractive because they carried higher fees than other loans, and allowed WaMu to book profits on interest payments that borrowers deferred. As WaMu was selling many of its loans to investors, it did not worry about defaults.
In December 2007, the subsidiary Washington Mutual Bank reorganized its home-loan division, closing 160 of its 336 home-loan offices and removing 2,600 positions in its home-loan staff (a 22% reduction).
In March 2008, on the same weekend that JPMorgan Chase Chairman and CEO Jamie Dimon negotiated the takeover of Bear Stearns, he secretly dispatched members of his team to Seattle to meet with WaMu executives, urging them to consider a quick deal. However, WaMu Chairman and CEO Kerry Killinger rejected JPMorgan Chase's offer that valued WaMu at $8 a share, mostly in stock.
In April 2008, the holding company, responding to losses and difficulties sustained as a result of the 2007-2008 subprime mortgage crisis, announced that 3,000 people companywide would lose their jobs, and the company stated its intent to close its approximately 186 remaining stand-alone, home-loan offices, including 23 in Washington State and a loan-processing center in Bellevue, Washington. It stopped buying loans from outside mortgage brokers — known in the trade as "wholesale lending." WaMu also announced a $7 billion infusion of new capital by new outside investors led by TPG Capital. TPG agreed to pump $2 billion into the Washington Mutual holding company; other investors, including some of WaMu's current institutional holders, agreed to buy an additional $5 billion in newly issued stock. This angered many investors, as TPG's investment would dilute the holdings of existing shareholders, and as WaMu executives excluded mortgage losses from computing bonuses.
In June 2008, Kerry Killinger stepped down as the Chairman, though remaining the Chief Executive Officer. On September 8, 2008, under pressure from investors, the Washington Mutual holding company's board of directors dismissed Kerry Killinger as the CEO. Alan H. Fishman, chairman of mortgage broker Meridian Capital Group, and a former chief operating officer of Sovereign Bank, was named the new CEO.
By mid-September 2008, WaMu's share price had closed as low as $2.00. It had been worth over $30.00 in September 2007, and had traded as high as $45 at one point in the previous year. While WaMu publicly insisted it could stay independent, earlier in the month it had quietly hired Goldman Sachs to identify potential bidders. However, several deadlines passed without anyone submitting a bid. At the same time, WaMu suffered a massive run (mostly via electronic banking over the internet and wire transfer); customers pulled out $16.7 billion in deposits in a ten-day span.
This led the Federal Reserve and the Treasury Department to step up pressure for WaMu to find a buyer, as a takeover by the Federal Deposit Insurance Corporation (FDIC) could have been a severe drain on the FDIC insurance fund, which had already been hard hit by the failure of IndyMac that year. The FDIC ultimately brokered the deal, and held a secret auction of the bank. Finally, on the morning of Thursday, September 25 (coincidentally the 119th anniversary of WaMu's establishment), regulators informed JPMorgan Chase that it was the winner.
On Thursday night (shortly after the close of business on the West Coast), the Office of Thrift Supervision seized Washington Mutual Bank and placed it into the receivership of the FDIC. In a statement, the OTS said that the massive run meant that WaMu was no longer sound. The FDIC, as receiver, sold most of Washington Mutual Bank's assets, including the branch network, all of its deposit liabilities and secured debts to JPMorgan Chase for $1.9 billion. The transaction did not require any FDIC insurance funds. Normally, bank seizures take place after the close of business on Fridays so the FDIC can have the weekend to find a buyer for the failed bank. However, due to the bank's deteriorating condition and leaks that a seizure was imminent, regulators felt compelled to act a day early.
JPMorgan Chase didn't acquire any of Washington Mutual Bank's equity obligations (though JPMorgan Chase planned to issue $8 billion in common stock to recapitalize the bank). As a result of the seizure, WaMu's stockholders were nearly wiped out. Its stock price dropped to $0.16 a share, far from $45 a share in 2007. In their Chapter 11 filing, WaMu listed assets of $33 Billion and Debt of $8 Billion. (ref. Appendix A). The filing also indicates that enough funds are available for distribution to unsecured creditors.
Currently, shareholders are fighting for what they see as the illegal seizure of Washington Mutual through such websites as www.wamucoup.com, claiming that the OTS acted in an arbitrary and capricious manner and seized the bank for political reasons or for the benefit of JPMorgan Chase, which acquired a large network of branches at what they claim to be an unfairly low price. Shareholders claim that as of the date of the takeover, the bank had enough liquidity to meet all its obligations and was in compliance with the business plan negotiated with the OTS 2 weeks earlier and that the holding company's board and management was kept completely in the dark about the government's negotiations with Chase, hampering the bank's ability to sell itself on its own. Chief executive Alan H. Fishman was flying from New York to Seattle on the day the bank was closed, and eventually received a $7.5 million sign-on bonus and cash severance of $11.6 million after being CEO for 17 days. Senator Maria Cantwell has demanded an explanation from the government and threatened to open an investigation and Washington Mutual's former shareholders have threatened a lawsuit demanding compensation for the lost value of their shares.
The seizure of WaMu Bank resulted in the largest bank failure in American financial history, far exceeding the failure of Continental Illinois in 1984.
On September 26, 2008, Washington Mutual, Inc. and its remaining subsidiary, WMI Investment Corp., filed for Chapter 11 bankruptcy. As a result, it was delisted from the NYSE, and now trades on Pink Sheets.
All assets of the bank and most liabilities (including deposits, covered bonds, and other secured debt) of Washington Mutual Bank's liabilities had been assumed by JPMorgan Chase. However unsecured senior debt obligations were not assumed, leaving holders of those obligations with little meaningful source of recovery. On Friday, Sep. 26, 2008, Washington Mutual customers in the branches were given a letter that said the combined banks have 5,400 branches and 14,200 ATM's in 23 states.
For the time being, Washington Mutual account holders can continue banking as normal. Deposits held by Washington Mutual are now liabilities of JPMorgan Chase.
Washington Mutual Inc. owed $12.5 billion in back taxes to the IRS. The company filed court papers on January 22, 2009 alleging losses were so great, $20 billion, the company requested that it pays only part of the tax debt, and that the IRS could owe Washington Mutual Inc. a tax refund.
In the future, all of the Washington Mutual Bank branches will be renamed to Chase or will be shuttered. All financial documents issued by WaMu will carry the JP Morgan logo. WaMu credit and debit cards will also carry the Chase logo. As of November 2008, Chase ATMs are accessible for WaMu customers at no extra charge, and WaMu customers will eventually be able to bank at Chase branches. The acquisition of Washington Mutual Bank gives Chase its first significant presence on the West Coast. An exact date for conversion or shuttering of branches has not been announced at this time.
WaMu introduced an advertising campaign during the 2003 Academy Awards known as the “The Power of Yes”. This was to promote the offering of loans to all consumers, particularly borrowers that the banks deemed too risky. Another commercial in the ad series showed WaMu representatives in casual clothes, contrasting with traditionally-dressed bankers in suits.
A promotional Washington Mutual "Whoo hoo!" bumper sticker."Whoo hoo!" was an advertising campaign introduced by Washington Mutual in February of 2008. As fears of an economic crisis were rising, and WaMu was looking to become an "iconic brand that people love", they began courting consumers with a new slogan, designed to position WaMu as a consumer-friendly institution.
During its run, the Whoo hoo! ads, created by TBWA\Chiat\Day of Playa del Rey, California, become widespread in web navigation. After WaMu launched the new advertisement, there was double digit growth at its website and the term “wamu” appeared in searches over 1,000% more between January and March than in all of 2007.
Washington Mutual (before the bank's September 2008 conservatorship and sale to JPMorgan Chase) applied to register a trademark in the phrase. Initially, the bank wanted to use "woo hoo" (without the "h" in the first word) as the slogan, but they were concerned because of the existing use of the phrase by Homer Simpson, a character in The Simpsons.
History from Wikipedia and OldCompany.com (old stock certificate research service).