In his first public statement since the seizure of Washington Mutual, former chief executive Kerry Killinger plans to tell a congressional subcommittee that the bank could have survived and that regulators seized it precipitously, according to people familiar with his testimony.
Killinger’s testimony, and that of former WaMu President Steve Rotella, obtained in advance through interviews by the Puget Sound Business Journal, will paint a picture of a bank that was close to stabilizing its finances amid the financial turmoil of 2008.
Killinger plans to use charts and graphs at the April 13 hearing in Washington, D.C., to show the Seattle-based bank’s improving financial condition at the time, and to argue against the “bargain purchase” of WaMu by JPMorgan Chase & Co. The New York bank paid $1.9 billion for WaMu’s $307 billion in assets.
The testimony is part of an inquiry into events leading up to WaMu’s seizure and sale in September 2008 in what has become known as the largest bank failure in U.S. history.
The official purpose of the hearing by the Senate Permanent Subcommittee on Investigations is to question executives about their decision to expand into risky mortage lending, particularly in the last 10 years of the bank’s life.
But the hearing may also address the other big question that looms over WaMu’s downfall: Did regulators move in too soon?
According to people familiar with the prepared testimony, Killinger and Rotella will treat the question differently. Killinger is expected to say regulators should not have seized the bank.
It’s unclear if Rotella will echo that view at the hearing, but it currently isn’t part of his prepared remarks, according to people familiar with the testimony who spoke on condition of anonymity because of the sensitive nature of the ongoing investigation.
The hearing, which will include other high-ranking WaMu officials, also will highlight the competing narratives that have developed to explain the bank’s downfall. One line says WaMu had become hopelessly mired in subprime debt, posing a risk to depositors, and that federal regulators acted to prevent a messy and expensive failure. The other line says that despite deep exposure to subprime losses, the bank had largely stabilized its finances and qualified as “well capitalized” when regulators seized it.
Last year, a Business Journal investigation found that Washington Mutual was solvent when regulators seized it, that regulators undercut the bank’s own efforts to raise capital and that the eventual buyer, JPMorgan Chase, had a plan in the works to buy the bank from the government months before regulators took over.
The testimony, followed by questions from U.S. senators, represents the first time any of the executives will talk publicly about their actions at the bank.
The hearing is particularly significant because Killinger and Rotella have remained out of the public eye since WaMu’s closure.
The hearing is part of the continuing attention WaMu’s collapse commands more than a year and a half after it was seized by the federal Office of Thrift Supervision (OTS) and the Federal Deposit Insurance Corp. (FDIC).
In addition to the hearing, a nearly 600-page settlement in the complicated Chapter 11 bankruptcy of WaMu’s holding company was recently proposed. The move has sparked a new wave of legal wrangling over the billions of dollars of assets remaining after WaMu shut down.
What’s more, a long-anticipated report on WaMu by the Inspector General offices of the FDIC and the OTS is expected to be released soon, according to the Treasury Department.
“WaMu is a political nightmare,” said Stephen Klein, an attorney at Seattle-based law firm Graham & Dunn.
“The question in this case is, ‘Did the FDIC seize the bank prematurely?’ It’ll be interesting to see politically how that’s handled.”
Killinger’s testimony is expected to be the most dramatic. He is expected to say that government officials turned their back on the century-old Seattle institution in the months before they seized it because WaMu was not part of an elite “club” of Wall Street bankers.
The former chief executive, who was ousted three weeks before WaMu was closed, plans to point to the Treasury Department’s refusal to place the bank on a list of financial institutions that were off-limits to short sellers during the summer before its closure, a move that would have helped support WaMu’s plummeting stock price at the time, according to people familiar with the testimony.
Killinger also was expected to discuss the changes in federal laws in the weeks following WaMu’s seizure that allowed the government to bail out other large financial institutions, these people said.

There's also something fundamentally different about being the party that largely stands for tested status quo ideals, and one that stands for new, stark departures from what the people know. Bipartisanship is not equally viable or desirable for both sides at any given time.

Nevertheless, powerful contrasting images.

I don't know enough about the detail to know the answer, but your comment (c) above is a comment on revenue. Even if we were to direct the "revenue" toward current obligations and not this new plan, is there any reason to think that the rising medical costs wouldn't continue in such a way as to eat up the new revenue, even if our breathing time was extended by a number of years?

I guess my question is this: If you were to take the current offsets and apply them to the current, existing problem, is that a long-term fix or just a short-term patch? I wish I knew the answer.