Years before collapse, it wasn't the same WAMU



Bio | Email | Follow: @GlennFarley

Posted on April 13, 2010 at 5:44 PM

Updated Tuesday, Apr 13 at 6:37 PM

MERCER ISLAND, Wash. - Jerry Gropp's relationship with Washington Mutual goes back to 1955, when as an architect designing homes, he would introduce his clients to a banker at the WAMU branch in Ballard.

Often it was WAMU that would provide the lending to get the houses Gropp designed, built.

More than 50 years later, Gropp is still designing homes and watching the WAMU story unfold.

The bank was shut down in 2008 and sold to J.P. Morgan Chase. It's the biggest bank failure in U.S. history.

"I'm really heart-sick at this. I knew many of the employees who worked at the bank, and they lost their jobs. It's that simple. After many years of service," he said.

Gropp says he noticed a change about five years ago, as WAMU jumped into the competition for sub-prime mortgages. He showed me company advertising from decades ago that made a point that Washington Mutual kept loans in their portfolio. But toward the end, the company was bundling loans, many which are considered bad, and sold them to investors, at the same time paying big bonuses to executives like CEO Kerry Killinger.

"I really think it's the breakdown of our system of free enterprise. I have nothing against people making good pay," said Gropp. "But I think they have to perform for their money."

But it's the employees and investors who felt the brunt of WAMU's failure the most.

"It's a shame that when people think of Washington Mutual, they'll be thinking in terms of the people who will be testifying today," said Bruce Reilly, a 15-year WAMU employee who worked in corporate communications.

Among his duties were writing speeches for executives. He says he started at a much different company.

Reilly has landed on his feet, finding a job at another financial company. But he says his 401K that was his kids' college fund is worth about as much as a Big Mac. He praises a scholarship fund established by some Washington Mutual executives before the collapse that's helping fund his daughter's education. But he has two sons he still needs to put through.

"It wasn't the same company when I first started there. Those who were part of the scholarship fund who were truly the heart of the company," he said.