Chalk it up to a difference of opinion. Last week, The Wall Street Journal’s Kirsten Grind published The Lost Bank, her book-length account of the 2008 bank run on Washington Mutual, the Seattle-based lender seized by regulators in September 2008 and subsequently sold to JPMorgan for pennies on the dollar.
WaMu chief executive Kerry Killinger, who declined to be interviewed for Ms. Grind’s book, was quick to take issue with the book, penning a letter to friends and family. “While I am unable to address all of the book’s many inaccuracies, the below addresses some of its larger issues,” Mr. Killinger said in a letter obtained byThe New York Times.Two paragraphs from Mr. Killinger’s letter that caught our eye:
Washington Mutual’s board approved a strategic plan to gradually increase the sub prime and option ARM portfolios over a number of years. However, as the company became more cautious on the outlook for housing, it reduced the subprime channel and option ARM portfolios in 2006, 2007 and 2008. New option ARM loan originations declined by 65 percent from 2004 to 2007. This was not an accident but an intentional effort to limit risk to the company.
Subprime channel loans were always a small part of Washington Mutual’s business. Actions taken in 2005, 2006 and 2007 greatly reduced loan originations and market share. New originations were eliminated in 2007. 94 percent of the loans held in Washington Mutual’s option ARM portfolio at June 30, 2008 were originated with a loan-to-value of 80 percent or less and the average FICO score was 701.
We don’t have a copy of Ms. Grind’s book, The Lost Bank in front of us, but for the moment, we’re willing to accept Slate reviewer Moe Tkacik recommendation of the U.S. Senate’s report “Wall Street and the Financial Crisis” as a handy stand-in:
WaMu had held itself out as a prudent lender, but in reality, the bank turned increasingly to higher risk loans. Its fixed rate mortgage originations fell from 64% of its loan originations in 2003, to 25% in 2006, while subprime, Option ARM, and home equity originations jumped from 19% of the originations to 55%.
From 2004 to 2008, WaMu originated a huge number of poor quality mortgages, most of which were then resold to investment banks and other investors hungry for mortgage backed securities. For a period of time, demand for these securities was so great that WaMu formed its own securitization arm on Wall Street. Over a period of five years, WaMu and Long Beach churned out a steady stream of high risk, poor quality loans and mortgage backed securities that later defaulted at record rates.
Which of course it also, like, just an opinion, man.