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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
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First and foremost, Ms. Grind clearly did her homework and delivers an insightful and detailed accounting of what went so fabulously right for a long, long time - only to have it blow up in everyone's face. I can honestly say that we had absolutely no idea of what was going on with the Retail side of the bank (my wife was on the Commercial side) and in the bigger picture, NOBODY really had any idea how bad it was going to be. Even the experts (at least the ones anyone could hear) were expecting a "correction", but not a global meltdown of our Financial Sytem as we knew it.
As it regards the book, Ms. Grind clears-up a lot of myths and urban legends surrounding the collapse of the bank. Here's three biggies, for example:
1. The FDIC reached over the OTS and closed WAMU without appropirate proceedure or authority.
2. WAMU had plenty of liquidity to survive the crisis.
3. Kerry Killinger and Steve Rotella were first informed of the shut-down when they heard it on a TV Monitor in an Airport Bar.
All three completely untrue and clearly explained in the book.
It's obvioulsy fun for me to read about these characters that I knew, and in a few cases still bump into. But the bigger take-away is to remind us all of the hubris that infects us when things are going well. "It will NEVER END" we tell ourselves. We'll all just get richer and richer until everyone in North America has a NetJets pass and we'll just compete for the best seats at the Charity events in New York, Aspen and here in Seattle. Right?
As I was really getting into the meat of the story, I said to my wife "I'm suprised you haven't read this yet - it's great". Her reply?
"I'm not sure I want to revisit all that pain".
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.
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