The collapse and federal seizure of Seattle based Washington Mutual became the largest bank failure in American history. And CEO Alan Fishman, a Brooklyn banker who was just hired on September 7th to replace ousted CEO Kerry Killiger, will receive a mere $18 million in pay for just three weeks of work on the job. The ousted Killinger received $14.4 million in pay in 2007.
Since Fishman was hired on September 7, wary customers of WAMU withdrew more than $16 billion in funds from the bank out of fear of losing any assets over $100,000 in bank accounts.
The federal insurance limit on bank accounts is set at $100,000 per bank. The Federal Deposit Insurance Corporation has just $45.2 billion in available funds to cover bank failures and only two months ago the failure of California based IndyMac, a giant savings and loan business, drew $8.9 billion from this federal deposit insurance fund. The immediate sale by the feds to J.P. Morgan prevented the drain of $20 billion dollars from this rapidly shrinking insurance fund.
A large part of WAMU's troubles began during the previous housing boom when WAMU was a leader in high interest home loans loans to higher risk home buyers. WAMU also offered credit cards with an interest rate in excess of 23%. That's a rate about 10 points higher than many other credit card giants like Capital One, where many are paying 13.90% or less in interest on unpaid balances.
Washington Mutual was founded in 1889 and withstood wars as well as the Great Depression, but simply could not withstand this latest economic crisis in which so many people could no longer afford to pay for their home loans and defaulted. It is only the latest sign of the serious economic crisis in the U.S.
But you have to admit that for three weeks work, $18 million in pay isn't too bad. Makes you wonder what really went wrong here? Persons not getting paid back at WAMU are the shareholders and many bondholders in this bank. These now worthless stock certificates now make Jim Dandy birdcage liners.
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