WaMu drops ax again, cuts 1,200 jobs, including 260 at Seattle headquarters

Washington Mutual's struggles to right itself will cost 1,200 more people their jobs, including 260 at the troubled lender's downtown Seattle headquarters.

Seattle-based WaMu, which already has shed more than 3,500 jobs this year, said Thursday it was cutting jobs that weren't "mission-critical," meaning they weren't directly related to its core business or to its efforts to tighten credit standards and hold down expenses.

The layoffs include workers in WaMu's mortgage business, which has been sharply curtailed as the company tries to recover from a rising tide of defaults and foreclosures, the aftereffects from a binge of loose lending.

Centralizing support functions will also claim jobs in technology, human resources and general corporate functions, spokeswoman Darcy Donahoe-Wilmot said.

Though the cuts are spread throughout the company, the Seattle region is taking one of the hardest hits.

The 260 people losing their jobs here are about 5.7 percent of WaMu's local employment of 4,600 (including about 3,500 at the 42-story WaMu Center at Second Avenue and Union Street).

The company employs 1,700 people elsewhere in Washington state. As of March 31, it employed 45,883 people companywide.

WaMu employees — known by the nickname "WaMulians" — were told about the cuts Thursday morning, Donahoe-Wilmot said.

Some of the affected workers will lose their jobs in a week or two, Donahoe-Wilmot said. Most will be gone by the end of the year.

Eligible laid-off employees who don't find jobs elsewhere in the company will receive severance and job-placement help.

More vulnerable

The nationwide housing slump and subsequent credit crunch has battered many lenders, but WaMu has been hit harder than most.

Its mortgage portfolio is heavy with subprime loans, adjustable-rate loans and home-equity loans — all categories with especially high default rates.

As a result, the lender has had to set aside billions of dollars to cover bad loans and slash its quarterly dividend to a nominal penny per share.

In April, a group of institutions led by private-equity firm TPG pumped $7.2 billion into WaMu, in exchange for a stake potentially equal to just over half the company's stock.

And early this month, WaMu's board stripped Chief Executive Kerry Killinger of the chairman's title he had held since 1991.

WaMu' stock, which was trading above $40 a year ago, has tumbled precipitously. It closed Thursday at $6.35, up 9 cents.

No longer at top

The decline has cost WaMu its longtime title of the nation's most valuable thrift by market capitalization.

Despite its troubles, WaMu remains the nation's sixth-largest financial institution in terms of deposits ($188 billion as of March 31) and the eighth-largest in terms of assets ($319.7 billion as of March 31).

Going forward, it has chosen to emphasize its retail-banking business, which remains relatively healthy.

WaMu has shut down its network of free-standing home-loan offices, ceased buying loans from outside mortgage brokers and stopped offering several of the riskier kinds of mortgages, including the subprime loans at the epicenter of the mortgage meltdown.

Just Wednesday, WaMu said it would stop offering negative-amortizing loans and WaMu Mortgage Plus loans.

The former add unpaid but accrued interest to the loan balance, with borrowers possibly ending up owing more than they borrowed.

The latter are mortgage loans with built-in lines of credit and flexible payments.

Drew DeSilver: 206-464-3145 or ddesilver@seattletimes.com