WASHINGTON — Washington Mutual simply wasn't connected enough to be bailed out by the government.

That's how Kerry Killinger, the thrift's former chief executive, sees it. Regulators shut down Wamu while providing massive assistance to its competitors, he said.

"The company was ...excluded from hundreds of meetings and telephone calls between Wall Street executives and policy leaders that ultimately determined the winners and losers in this financial crisis," Killinger told the Senate Permanent Subcommittee on Investigations at a hearing Tuesday. "For those that were part of the inner circle and were 'too clubby to fail,' the benefits were obvious. For those outside the club, the penalty was severe."

Unlike other former CEOs who have recently offered broad apologies for their role in the financial crisis, Killinger was defiant against accusations that Wamu was poorly run and badly managed. He said that, given time, Wamu would have recovered had regulators not seized the thrift.

"I believe that Washington Mutual's seizure was unnecessary and the company should have been given a chance to work its way through the crisis," he said. "I also believe it was unfair that Washington Mutual was not given the benefits extended to and actions taken on behalf of other financial services companies within days of Washington Mutual's seizure."

Regulators shut down the $300 billion-asset thrift on Sept. 25 -- the largest collapse in U.S. history but provided open-bank assistance to Wachovia Corp. just four days later. Within a few weeks of Wamu's collapse, the government took much broader steps to help large financial institutions. The Federal Deposit Insurance Corp. guaranteed bank debt, the Federal Reserve Board injected massive amounts of liquidity into the system, and Congress enacted the Troubled Asset Relief Program, which gave tens of billions to the biggest banks.

Despite a raft of papers released by the panel that documented risky lending practices at Wamu, Killinger insisted the thrift was in relatively healthy shape.

"While clearly challenged by the much-worse than expected downturn, Washington Mutual was well positioned with sufficient capital and liquidity," he said.

Still, Sen. Carl Levin, the subcommittee's chairman, said Wamu was doomed long before it was closed. He produced a report of more than 500 pages that documented the thrift's push into option adjustable rate loans and other risky alternative mortgages after 2005. Many of those loans were later found to be fraudulent, Levin said.

"I don't know how a bank can possibly operate with credibility with these kind of problems and fraud in its midst," Levin said.

He was supported by other former executives at Wamu, some of whom testified that the thrift ignored warnings about bad lending and poor management practices.

James Vanasek, Wamu's chief risk officer from 2004 to 2005, said the thrift's management only cared whether a loan was profitable, and said he urged Killinger to abandon subprime lending in 2004.

But David Schneider, former president of home loans for Wamu, said the bank was reducing its market share of risky loans and its subprime unit was a small part of the company.

Much of the hearing focused on the failure of the management at Wamu but Levin's panel is scheduled to hold another hearing on Friday on regulators' supervision of Wamu.

Still, some former executives said the Office of Thrift Supervision treated the thrift well.

"The approach that the OTS took was much more light-handed than I was used to," said Ronald Cathcart, former Wamu chief risk officer from 2006 to 2008.

Vanasek said Wamu's asset size contributed to OTS's supervision.

"The fact is that Washington Mutual made up a substantial portion of the assets of the OTS and one wonders if the continuation of the agency would have existed if Washington Mutual had failed, so I think they had a strong mutual interest in the company succeeding," he said.

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