WASHINGTON — Former Washington Mutual chief executive Kerry Killinger on Tuesday blamed federal regulators and an insular Wall Street culture for the demise of the bank, saying that firms that were "too clubby to fail" were protected during the financial crisis in 2008.
Killinger, who is set to testify before the Senate Homeland Security and Governmental Affairs Committee's investigating panel, in prepared testimony complained of "unfair treatment" of Washington Mutual, the largest bank failure in history in 2008, when it was seized and sold to JPMorgan Chase & Co.
Killinger argued that the seizure "was unnecessary" and said the company "should have been given a chance to work through the crisis." Regulators didn't give Washington Mutual benefits afforded to other banks in crisis, Killinger said, pointing to injections of capital through the Treasury Department's Troubled Asset Relief Program, Federal Deposit Insurance Corp. guarantees and Federal Reserve injections of liquidity.
Similarly, Killinger said, Washington Mutual was excluded from "hundreds of meetings and telephone calls between Wall Street executives and policy leaders that ultimately determined winners and losers in this financial crisis."
"For those that were part of the inner circle and were 'too clubby to fail,' the benefits were obvious," Killinger said. "For those outside the club, the penalty was severe."
The Permanent Subcommittee on Investigations, part of the Senate Homeland Security and Governmental Affairs Committee, is focusing its hearing Tuesday on Washington Mutual. According to the panel's findings, "higher risk loans" - including negative amortization loans - gradually came to dominate the company's balance sheet from 2003 to 2008 because the loans were more profitable.
Killinger's compensation likely will be a topic of conversation, as an investigation memo points to "millions of dollars paid to Washington Mutual senior executives even as their higher risk lending strategy began to lose money and increase the risk in bank's own investment portfolio."
2008, a year in which Killinger was asked to leave the bank, he received $21 million in total compensation, and he received nearly $100 million in compensation between 2003 and 2008.