Washington Mutual, Inc (often abbreviated to WaMu) was an American savings bank holding company based in Seattle. It was the parent company of Washington Mutual Bank, which was the largest savings and loan association in the United States until its collapse in 2008.
On September 25, 2008, the United States Office of Thrift Supervision (OTS) seized WaMu's banking operations and placed them under the receivership of the Federal Deposit Insurance Corporation (FDIC). The OTS took the action due to the withdrawal of US$16.7 billion in deposits during a 9-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 and equity claims) to JPMorgan Chase for $1.9 billion, which had been considering acquiring WaMu as part of a plan internally nicknamed "Project West". All WaMu branches were rebranded as Chase branches by the end of 2009. The holding company was left with $33 billion in assets, and $8 billion in debt, after being stripped of its banking subsidiary by the FDIC. The next day, it filed for Chapter 11 voluntary bankruptcy in Delaware, where it was incorporated.
Regarding total assets under management, WaMu'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 WaMu's 2007 SEC filing, the holding company held assets valued at $327.9 billion (~$476 billion in 2024).
On March 20, 2009, WaMu filed suit against the FDIC in the United States District Court for the District of Columbia, seeking damages of approximately $13 billion (~$18.4 billion in 2024) for an alleged unjustified seizure and unfair low sale price to JPMorgan Chase. JPMorgan Chase promptly filed a counterclaim in the Federal Bankruptcy Court in Delaware, where the WaMu bankruptcy proceedings had been continuing since the Office of Thrift Supervision's seizure of the holding company's bank subsidiaries.
Contents
Business operations prior to bank receivership
Despite its name, WaMu ceased being a mutual company in 1983 when it demutualized and became a public company on March 11. On June 30, 2008, WaMu had total assets of $307 billion (~$438 billion in 2024), with 2,239 retail branch offices operating in 15 states, with 4,932 ATMs, 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, WaMu experienced a bank run whereby customers withdrew $16.7 billion in deposits over those nine days, and in excess of $22 billion in cash outflow since July 2008, both conditions which ultimately led the Office of Thrift Supervision to close the bank.
The FDIC then sold most of the bank's assets to JPMorgan Chase for $1.9 billion in cash plus assumption of all secured debt and some unsecured debt. Claims of the subsidiary bank's equity holders, senior and subordinated debt (all primarily owned by the holding company) were not assumed by JPMorgan Chase.
History
Mutual savings bank
WaMu was incorporated as the Washington National Building Loan and Investment Association on September 25, 1889, after the Great Seattle Fire destroyed 120 acres (49 ha) 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 September 12, 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".
Post-demutualization growth
In April 1982, WaMu purchased the brokerage firm Murphey Favre for undisclosed amount in cash and demutualized the following year, converting into a capital stock savings bank. Stock in the capital stock savings bank was first offered for sale on March 11, 1983. By 1989, its assets had doubled.
In November 1994, WaMu reorganized as a holding company, Washington Mutual, Inc. It separated the non-banking units from its primary banking unit, Washington Mutual Savings Bank, which was simultaneously renamed Washington Mutual Bank. The company's stock continued to trade on Nasdaq under WAMU.
In October 2005, WaMu purchased the formerly "subprime" credit card issuer Providian for approximately $6.5 billion, although Providian's new management team's strategy of targeting Prime credit card consumers had been underway since 2001, therefore the credit card unit's nonperforming loan portfolio had improved significantly prior to the company's sale to WaMu. In March 2006, WaMu began the move into its new headquarters, WaMu Center, located in downtown Seattle. The company's previous headquarters, WaMu Tower, stands about a block away from the new building on Second Avenue. In August 2006, WaMu began using the official abbreviation of WaMu in all but legal situations.
After 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 became the nation's 9th-largest credit-card company.
Many of WaMu's acquisitions became reviled as the rapid post-merger integrations resulted in numerous errors. The purchase of the original PNC Mortgage came at a time when subprime lending was in a "boom" period, with PNC Financial Services believing that the market was too volatile. (PNC later re-entered the mortgage market in 2009 through its acquisition of National City Corp., with no plans to re-enter subprime lending.) The Dime merger resulted in account ownership to be split with account beneficiaries. The Fleet Mortgage merger resulted in entire loans simply disappearing—being serviced, but unable to be found by customer service representatives.
Expansion
In April 1983, WaMu announced the pending acquisition of three branch offices from the Tacoma-based United Mutual Savings Bank for $3.25 million (~$8.58 million in 2024). In April 1984, WaMu announced the pending acquisition of the Spokane-based Lincoln Mutual Savings Bank with 14 of its 16 branch offices for $4.5 million. At the time of the announcement, WaMu had 39 branch offices, mostly in western Washington.
In May 1987, WaMu announced the pending acquisition of the Wenatchee-based Columbia Federal Savings Bank for $40 million and also the Seattle-based Shoreline Savings Bank for $7.5 million. At the time of the announcement in May 1987, WaMu had 50 branch offices, all within Washington state. Both acquisitions were completed in April 1988.
In January 1990, WaMu announced the pending acquisition of all seven offices of the Seattle-based Old Stone Bank of Washington from the Rhode Island–based Old Stone Corporation for an undisclosed amount. Old Stone originally entered the state of Washington through the acquisition of the ailing Seattle-based Citizens Federal Savings and Loan Association in 1985 with the assistance of the Federal Savings and Loan Insurance Corporation. The acquisition by WaMu was completed in June 1990 for $10 million.
In June 1990, WaMu announced the completed acquisition of all six offices of the failed Walla Walla–based Frontier Federal Savings and Loan Association in Eastern Washington from the Resolution Trust Corporation for $1.8 million (~$3.81 million in 2024).
In September 1990, WaMu announced the completed acquisition of all three Washington branches of the failed Utah-based Williamsburg Federal Savings and Loan Association from the Resolution Trust Corporation for $1.3 million (~$2.75 million in 2024).
In November 1990, WaMu announced the pending acquisition of the Vancouver-based VanFed Bancorp with its Vancouver Federal Savings Bank subsidiary for $23.3 million (~$49.3 million in 2024). At the time of the announcement in November 1990, WaMu had 75 branch offices, all within Washington state. The acquisition was completed in August 1991.
The acquisition of the Pacific Northwest branch offices from the New York–based CrossLand Savings Bank that was announced in April 1991 and completed in November 1991 gave WaMu four offices within the state of Washington in addition to other offices located in the state of Oregon.
Commercial banking
With a thrift charter, there were a few things that WaMu was not able to do until it was able to obtain a commercial bank charter, such as making commercial loans above a certain size. To get around this problem, WaMu began to purchase commercial banks and maintain them as separate business entities. In August 1995, WaMu acquired the one office Bellevue-based Enterprise Bank in Washington. A few months later, WaMu acquired the 41 office Coos Bay–based Western Bank in Oregon. By 1997, the Enterprise name and Western Bank name were merged and operated under Western Bank moniker.
After WaMu expanded into California through the acquisitions of American Savings, Great Western, and Home Savings, WaMu quietly acquired the one-office Industrial Bank in the Van Nuys neighborhood of Los Angeles for an undisclosed amount in 1999 and renamed it WM Business Bank.
By 2001, WaMu had 38 specialized business banking centers operating under the Western Bank name in the Northwest and the WM Business Bank name in California when they decided to exit their ill-fated venture into the commercial banking market that was then dominated with the likes of Wells Fargo and Bank of America.
Mortgage banking
During the late 1990s and early 2000s, WaMu decided to aggressively expand in the subprime mortgage lending field through the acquisition of existing mortgage companies at a time when other financial institutions were leaving.
In May 1999, WaMu announced the pending acquisition of the Orange, California-based Long Beach Financial Corporation with its Long Beach Mortgage Company subsidiary for $350.4 million (~$619 million in 2024) in cash and stock. The acquisition was completed in October 1999. Long Beach had specialized in providing subprime mortgages. Some of Long Beach's questionable business practices may have led to WaMu's failure in 2008.
In January 2000, WaMu announced the pending acquisition of the Los Angeles–based Alta Residential Mortgage Trust for $23 million (~$39.7 million in 2024).
In October 2000, WaMu announced the pending acquisition of the Vernon Hills, Illinois-based PNC Mortgage Corporation and PNC Mortgage Securities Corporation from the PNC Financial Services Group for $605 million (~$1.04 billion in 2024) in cash. The acquisition was completed in February 2001. The result of the PNC Mortgage acquisition made WaMu the nation's third-largest lender.
In April 2001, WaMu announced the pending acquisition of the Columbia, South Carolina–based Fleet Mortgage Corporation from FleetBoston Financial for $660 million (~$1.11 billion in 2024) in cash. The acquisition was completed in June 2001. The result of the Fleet Mortgage acquisition made WaMu the nation's second-largest mortgage-servicing business.
In December 2001, WaMu announced the pending acquisition of the Jacksonville, Florida-based HomeSide Lending, Inc. from the National Australia Bank for $1.9 billion (~$3.2 billion in 2024). The agreement did not include the mortgage servicing rights and related financial hedges for the business. The acquisition was completed in March 2002. In August 2002, WaMu announced the pending acquisition of the rest of HomeSide that included the mortgage servicing rights on a mortgage portfolio worth about $131 billion for $1.3 billion in cash and the assumption of $735 million in debt. The acquisition was completed in October 2002.
Credit cards
In June 2001, WaMu announced the pending acquisition of Providian Financial Corporation, tenth-largest credit-card issuer in the country, for $6.45 billion (~$10.9 billion in 2024) in stock and cash. The acquisition was completed in June 2001.
Prior to this acquisition, WaMu had their credit cards initially issued by Associates National Bank and later Citibank South Dakota, N.A. and was one of the largest banking organization that did not issue its own credit cards. In 2005, chairman and chief executive officer Kerry Killinger said that lack of company-issued credit cards was a "major hole in our product line." Credit cards were not mentioned on their website nor in their published annual reports as an available service offered by their company prior to 2001.
Rise and fall
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 approve loans while placing less emphasis on borrowers' incomes and assets. WaMu set up a system that enabled real estate agents to collect fees of more than $10,000 for bringing in borrowers. Variable-rate loans – 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 worried less about defaults.
In December 2007, the subsidiary WaMu 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 subprime mortgage crisis, announced that 3,000 people companywide would lose their jobs, and the company stated its intent to close its approximately 176 remaining stand-alone, home-loan offices, including 23 in Washington 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 WaMu 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.
Post receivership bank operations
During 2009, all of the WaMu Bank branches that had been purchased from the FDIC after the bank had been placed into receivership, were rebranded to Chase or shuttered. All financial documents issued by WaMu were changed to carry the Chase logo. Credit and debit cards issued by WaMu or Providian were changed to carry the Chase logo.
The transition to Chase began in early 2009, when Chase ATMs became accessible for WaMu customers at no extra charge. All branches and accounts were formally merged in 2009 as the WaMu brand was retired. Branches in the Pacific Northwest, Idaho, and Utah were rebranded in May 2009; branches in Florida, Georgia, Texas, Illinois, and Greater New York were rebranded in July 2009, and the remaining branches in Nevada, California, Arizona, and Colorado were rebranded in October 2009. The last rebrandings formally retired the WaMu name.
In markets where Chase already had a dominant presence, such as Greater New York and Chicago (owing to the presence of Chase and predecessor Bank One), Chase further disposed of such branches to other banks. In New York, for instance, the acquisition resulted in Chase branches located on the same block as WaMu branches.
Advertising campaigns
"Free Checking Account"
This advertising campaign was introduced between 2005 and 2007. Numerous WaMu commercials showed white, traditionally-dressed 60–70-year-old overweight bankers laughing out loud at a WaMu representative (who is much younger, fitter and black), who says the words "Free Checking Account".
"The Power of Yes"
WaMu introduced an advertising campaign during the 2003 Academy Awards known as "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.
"Whoo hoo"
"Whoo hoo!" was an advertising campaign introduced by WaMu in February 2008. As fears of a financial 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.
WaMu (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.
Occasio branch design
WaMu introduced a unique branch design known as Occasio which eliminated traditional teller windows and queuing stanchions in favor of an open, circular floor plan with a greeter or "concierge" position and tellers working from behind podiums. The Occasio design was introduced in 2000 and patented in 2004, but was phased out following the JPMorgan Chase acquisition of WaMu's retail banking operations.