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The Lost Bank: The Story of Washington Mutual-The Biggest Bank Failure in American History Hardcover – June 12, 2012
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Amazon Best Books of the Month, June 2012: The collapse of Washington Mutual in September 2008 was the largest bank failure in U.S. history and a symbolic casualty of America’s unfolding financial crisis. Wall Street Journal reporter Kristen Grind provides a fascinating fly-on-the-boardroom-wall account of the bank’s final hours, and takes us back through the history of what started as a quirky, familial savings and loan and became a byword for America’s financial malfunction. This is no tedious, dry retelling of a story we’ve heard hundreds of times in the last four years—Grind masterfully explains even the most complex financial concepts and has a natural talent for ferreting out tiny but humanizing details. Grind has already received numerous awards for her coverage of WaMu’s mighty fall, and The Lost Bank stands beside The Big Short and Too Big to Fail as required reading for students of the Great Recession. --Juliet Disparte
“Journalist Kirsten Grind has written a first-rate accounting of the spectacular collapse of Washington Mutual and how behemoth JPMorgan Chase picked over its carcass. Thanks to Grind's winning narrative, what was previously one of the less-well known financial disasters of September 2008 is now fully—and entertainingly—explicated.”—William D. Cohan, author of Money and Power and House of Cards
"An exhaustively researched and well-written account of one of the widely ignored chapters of the great financial crisis. Grind does an excellent job of bringing the complex story to life, and capturing the sense of drama and the impact on peoples' lives. It also casts a spotlight on the role of the FDIC, which has not received as much attention as it should have done. An insightful and well-written book."—Gillian Tett, author of Fool's Gold
"Kirsten Grind’s dogged reporting lays bare a tale of out-of-control salesmen and executive-level gamblers who transformed one of America’s most respected banks into a weapon of mass financial destruction. The Lost Bank is a page-turning read that exposes the Wild West banking tactics that harmed customers, workers and the nation as a whole."—Michael W. Hudson, author of The Monster
“The transformation of Washington Mutual from folksy community lender to reckless 2000-branch behemoth is one of the epic stories of American finance. The bank that banned potted plants to save money in the 1980s became the bank that hired white-suited ‘evangelists’ to praise its go-go mortgages with screams of 'WaMu-lujah.' Grind tells this boom-bust story without lapsing into melodrama or malice, and her tale is all the more powerful for that.” —Sebastian Mallaby, author of More Money Than God
"The Lost Bank is a superbly written, insider account of the collapse of Washington Mutual, among the more surprising downfalls of the financial crisis. It's a story of hubris, ambition and poor judgment that entertains but also is a disturbing coda to the difficult period, providing enduring lessons about how a group of executives who predicted the housing collapse were somehow felled by it."—Gregory Zuckerman, author of The Greatest Trade Ever
"What a marvelous book this is, so well-reported and so well-told by a writer who really threw herself into telling her story. And what an incredible tale that turns out to be, a once-beloved bank felled by greed, hubris, and a shocking disregard of all the obvious warning signs portending the financial disaster that was about to hit all of us. The life-savings of shareholders go up in smoke, a long-standing institution is done in by a new breed of short-sited executives, and meanwhile there was the havoc caused by all those subprime mortgages Washington Mutual, one of the country’s more aggressive and reckless lenders, pushed through the financial system. The Lost Bank would be a joy to read if not for the Greek tragedy that unspools vividly and painfully before your eyes. A first-rate job by a first-rate journalist."—Gary Rivlin, author of Broke, USA
"A detailed, instructive account of a bank failure far away from the power centers of New York City."—Kirkus Reviews
"Lucid, entertaining . . . One of the best accounts... of the Great Crash as it played out on a human scale.”—Publishers Weekly (starred review)
"In The Lost Bank, Grind achieves the best of the business journalist's calling, not only reporting the WaMu disaster in clear, compelling prose for the general reader, but also offering new information and details that may surprise those who think they know the story... [A] sparking achievement."—Jon Talton, The Seattle Times
"Grind... has produced a compelling case study of corporate incompetence and of how regulators are politically captured by the businesses they are meant to oversee."—Steven Pearlstein, The Washington Post
"An eye-opening book."—Booklist
"If indeed this book had been fiction, it would have been branded unrealistic, outlandish, and out of the realm of reality. It is, however, a factual account with endnotes, references, and detailed documentation of sources used. It is an incredible story... The book reads very much like a novel and holds the reader’s interest."—William J. Taylor, ABA Banking Journal
"A fantastic story... Every American should read about it..."—John Hockenberry, "The Takeaway"
"Almost a Barbarians-esque view..."—Andrew Ross Sorkin, "Squawk Box"
"Wall Street Journal reporter Kirsten Grind deftly restores the 'lost bank' to its rightful place in the annals of financial disasters... The clarity and humility of the writing is refreshing."—Tom Braithwaite, The Financial Times
Top customer reviews
The book is more about the unraveling of Kerry Killinger and his executive team than it is about the bigger problems that plagued the credit and housing markets. But it's a great snapshot of the biggest bank collapse in American history and those who were supposed to regulate it. All told, the book feels accurate.
I was an officer at WaMu, having spent time in various marketing roles at the bank, including tours with the Retail Bank and Home Loans. I was there right up till the end and remember vividly that evening on September 25, 2008 when we found out we had been seized and handed over to JPMorgan Chase. We weren't surprised we were snatched up by another bank, but we were we disappointed it was Chase, which we knew would almost certainly eliminate all our jobs. As a marketer, the knowledge that Chase would impose its cold, tone deaf brand across our branch network, including Seattle, just added insult to injury. While I certainly wasn't privy to the conversations happening among WaMu executive team (thank God), I have to say the book largely reflects the perception that I believe most of the employees at headquarters had at the time. We thought WaMu's leaders, namely those in Home Loans, had completely lost their way and polluted the portfolio. We thought Kerry's pollyannaish view of the world totally outweighed the intellect that had made him a banking superstar. We thought our own executives' terrible decisions were due not only to their own greed and naivete, but also pressure from the secondary markets. (Meaning, effectively WaMu was seduced by the Goldmans and Lehmans of the world; the investment banks created an insatiable hunger for dangerous, high margin products that slowly infected each step of process - from the secondary markets, the consumer banks, the brokers and ultimately the consumers too. That's not to say WaMu's leaders weren't also culpable - I think they were). We thought Kerry never had access to the real power corridors roamed by the likes of Hank Paulson, Jamie Dimon and Sheila Bair. We thought that although we technically had adequate liquidity, a significant run on the bank would doom us because our massive deposit base would wipe out entirely the FDIC's reserves. We thought that neither Bair nor Paulson was particularly motivated to try to help the shareholders, customers or employees. That all proved to be true and this book does a good job, to varying degrees, of weaving some of those factors into a great story. Kirsten Grind really captured what was happening internally at WaMu, in my opinion.
At the end of the day, this was a sad time for our customers, shareholders, and employees. For the honest, hardworking people who "just worked there" and didn't know about the misguided decisions destroying the company, it was both fascinating and disheartening to watch the dominoes fall. We felt for our customers, our shareholders and each other. I think that comes through well in the book. As Grind notes, the place had an amazing culture, one I can't really articulate in a way that does it justice. People just loved working there, even as we started to unravel. The desire to do right by the customer was built into our DNA, and to see the way these terrible products had been foisted off on consumers to feed the cash machine felt like such a betrayal by leadership. Still, whether earnings were positive or negative, it was the best place I ever worked because of the people. So for me, reading this book felt like walking through a ghost story, as I sadly nodded my head throughout it. The financial crisis taught us that there were villains everywhere: the banks, the FDIC, OTS, Treasury, the brokers, the investment houses, and on and on it goes. This book certainly validates that, exposing both Kerry Killinger and Sheila Bair as myopic, out of their depth and hopelessly biased in very different ways. Sometimes I wish we could sentence Killinger and Bair to sit in a room together for the rest of their lives and contemplate their mistakes and philosophical differences while annoying muzak plays in the background. But the system doesn't punish the privileged equally, as we know. In general, I've moved on with my life and don't care much anymore.
This really is a good book. I would have liked to see Grind explore the impact of the Federal Reserve's (lack of) oversight throughout the 1990s and 2000s, along with on the secondary market's influence on the entire financial system, including consumer banks. I think those factors were the primary catalysts, at least in the beginning. In that regard, I think those omissions make the book a little bit incomplete. However, it's not a story about that. It's about WaMu. It's about the guy who built it, then lost it. And that's enough.
The book is composed of two stories. The first is the tale of a good looking executive—the first hurdle any up-and-coming executive must jump—that rises to CEO. He is not without skills, but they are limited. He possesses financial analysis skills, but is naïve to the rough and tumble world of residential real estate brokerage. The second tale is the story about a government agency, the FDIC, that lacks knowledge, creativity, insight and any other trait you might assume is essential for them to do their job properly.
Kirsten retells her story of WAMU using a reality TV show approach. Consequently, the book is captivating, but like all reality shows it gets boring as Kirsten describes the rise of a CEO without ideas. But this pause is quickly rectified as Kirsten begins to describe the regulators and their inaction. The book becomes a fascinating story of corporate and government hubris and back stabbing as the vultures assemble to dissect their prey. Kirsten unfortunately was not able to get the regulators to reveal much of their actions behind closed doors. I wish the regulators were more forthcoming, but the author does an excellent job of filling in the blanks based on what occurred. At this point, it is not the story of a lack of financial controls in WAMU, but a said tale of unregulated government egos running down a hapless bank in the Pacific Northwest, far from the power centers in that other Washington.
Kirsten portrays the CEO as an inattentive pretty boy working for adulation and a large salary, hoping others would solve the problems of the bank. This characterization might be correct. Kirsten does make you wonder how many other CEOs are just pretty faces without any substance.
Kirsten bases her story of WAMU’s demise on high risk loans, but in fact the problem was high risk borrowers. Repeatedly throughout the book Kirsten makes the point subprime loans were more profitable than prime loans. Unfortunately, the author never explains how the WAMU executives accepted this analysis. The author’s failure to explain why WAMU made subprime loans in the ghettos of Los Angeles, left me unsatisfied with the subprime loan portion of the story. She doesn’t discuss the role of the Fannie Mae in WAMU’s decision making process. This oversight deprives the reader of a full understanding of what happened in the Financial Crisis. Nevertheless, the portion of the story the author tells is crystal clear like the mountain water of the Northwest.