Wamu Acquisition

Taking Over WaMu

Emily LaBerge

From everyone who has been given much, much will be demanded; and from the one who has been entrusted with much, much more will be asked.

-Luke 12:48

In the fall of 2008 the economy was in a downward spiral. Wall Street had become dirty word. The Great Depression suddenly didn’t seem like that long ago. Billions of dollars were flying out the window like Monopoly money. Financial institutions were failing, merging, and getting bailouts from the government. Those less fortunate were filing for bankruptcy. Washington Mutual Bank was one of the less fortunate and would soon bear the stamp of the largest bank failure in U.S. history (Crisafulli, 2009).

Washington Mutual had been in trouble for a while, but just how long, few could say. Before the housing bubble burst, as a savings and loans bank specializing in products such as mortgages and credit cards, WaMu was seemingly doing well. However, as mortgage and credit card payments defaulted and home prices continuously plummeted in 2007 and 2008, the bank’s days were getting darker and darker. WaMu’s CEO Kerry Killington could not mask his apprehension in his letter to shareholders: “Over the course of my 30-plus years in banking and finance, including 18 years as CEO of WaMu, I have managed through many cycles. But this is the most difficult period I have seen for the market, and WaMu in particular” (Washington Mutual Annual Report 2007).

Not even Killington could know how dire the situation would become in September 2008. After it posted its largest loss in the history of the company in the second quarter of 2008, WaMu’s shares were trading at a measly $3, when as recently as June 2007, WaMu’s stock had been over $30 a share (Crisafulli, 2009). Starting September 15, the day that Lehman Brothers Holdings Inc. filed for bankruptcy protection, WaMu customers began heading for the exits. Over the next 10 days, they yanked a total of $16.7 billion in deposits (Sidel, Enrich, &...