WaMu: Seattle's big bank bites the dust

THE failure of Washington Mutual — at its death we cannot call it WaMu — is a business disaster of the first order for Seattle, for its downtown and its people.

The collapse was, institutionally, Washington Mutual's fault. As a company, it created and promoted the Option Adjustable Rate Mortgage, a surprise package under which a borrower might pledge his house for a loan that had neither a fixed rate of interest nor a fixed amount of principal owed, but left them both to sail in the economic winds.

When you hear the term "toxic waste" applied to bank assets, and read that JPMorgan Chase & Co. is writing off $31 billion of its new Washington Mutual loan portfolio, think Option ARMs. At its death, the Seattle bank was said to have $53 billion in face value of Option ARMs.

How many of Washington Mutual's 43,200 employees should be deemed personally responsible for this? Very few. The directors, to be sure. A more useless board of directors would be difficult to find. Former CEO Kerry Killinger, absolutely. A few others.

The rest were following the leader — running the computers, opening new accounts, refilling the cash machines, hiring employees, designing the ads, negotiating property leases, a thousand and one things, most of them done with dedication and skill. The bank failure is not their doing, and the smart employer who sees their résumés in the coming weeks will not tar them with it.

The result, however, will be that a cadre of banking brainpower will be dissipated. Seattle will be a financial center in local terms only. In hindsight, maybe that is what it should have stayed: It is when banks try to get big that they fail.

That was Seattle-First National Bank's case, a generation ago. It went to Texas and Oklahoma in an effort to grow, and bought toxic loans. Its branches here became Bank of America, just as Washington Mutual's now become Chase's.

The city that was once the proud headquarters of Seafirst, Rainier, People's, Seattle Trust, University Savings, Puget Sound Mutual and Washington Mutual — "The Friend of the Family" — now feeds bank corporations in Charlotte, N.C., and Manhattan.

There are, of course, small banks that have been started around here in the past 20 years. We wish them the best, but it will be a long time before Seattle has a big one again. It is as if our fishing fleet had one really big boat left, and it just sank.

At least there is the Federal Deposit Insurance Corp. That old line, "No one has ever lost a dime in an FDIC-insured account," has been proved true again. Thank you, FDIC, for rescuing the depositors. And welcome, too, to Chase Bank. We are sorry you needed to come, but glad you could.