Full disclosure: I've long thought of Washington Mutual's leadership team in high regard. During my "first tour of duty" with Bank Director, I had a chance to hear WaMu's than-CEO Kerry Killinger speak at one of our Acquire or Be Acquired conferences and came away impressed with his enthusiasm and vision for the bank. We covered WaMu in the pages of Bank Director throughout the 00's, so I'm well versed in their fall from grace. Yes, we'd seen their highs; sadly, history hasn't been kind to this once-darling of Wall Street. As many know, JPMorgan Chase bought the functional assets of Washington Mutual in the fall of '08. Once the nation's largest savings and loan, the price tag was a mere $1.9 billion after the federal government shut down the bank and held a quick auction. But until last night's news about the FDIC potentially suing former execs from the bank, I'd filed away their demise as product of the black hole many banks were sucked into. Now?
In preparing for yesterday's post on the coming wave of M&A, I went on to the FDIC's website to get a sense of where our industry is and where it might be heading. While I didn't cite any of their press releases, these three are all up and featured:
- First California Bank Assumes All of the Deposits of San Luis Trust Bank;
- Bank of Marin Assumes All of the Deposits of Charter Oak Bank; and
- HeritageBank of the South Assumes All of the Deposits of Citizens Bank.
If you read yesterday's post, you'll notice a common thread between what I wrote and what the FDIC has promoted: assisted transactions for healthy banks. Still, the third release gave me temporary pause -- not by the size of the deal; rather, the name of the acquirer. If you're on the board of any financial institution, I'll bet $20 you know the name Heritage (Community) Bank. No, not the one from above; rather, the failed bank whose executives and outside directors are under siege from the FDIC.
Our editor wrote about this type of government action last month in our publication. And many service providers (namely, attorneys) have sent clients executive briefings about what this might mean to them. Still, if you recall the S&L crisis of the late 80’s and early 90’s, the FDIC sued or settled claims against bank officers and/or directors on nearly a quarter of the institutions that failed during that time. And if the past is any indication of the future, then there is a significant risk that directors of failed banks from the recent financial crisis may see some type of action taken against them by the FDIC.
So who might be next? Well, it just came to light that the FDIC sent letters to former executives of the failed Washington Mutual Bank warning of possible legal action. According to a Wall Street Journal report I read last night, the regulator has already discussed damages of $1 billion in relation to the potential Washington Mutual lawsuit. So I have to wonder when and/or where this will all end... and who will be next.