It abandoned the building-and-loan model on which it was founded and decided to try a new kind of banking, called mutual banking.
It wasn't actually all that new. It was already established on the East Coast and had been around for a century in Europe.
Raymond Frazier, who would later become the bank's president, first encountered it in in Denmark, where it had worked well for that country's thrifty farmers. It differed from the commercial banks of the day in that it was intended as a safe haven for people of modest means. A mutual bank is, essentially, a bank that is owned and operated by its own investors.
It relies on the mutual investment of funds by small depositors "more interested in security than the chance of a big profit" Morgan. So in , the firm changed its name to the Washington Savings and Loan Association and patterned itself after the already-established mutual savings banks of the East Coast. It wasn't officially a mutual savings bank yet, because that would require alterations in Washington's state laws.
But it instituted some major changes, including the elimination of membership requirements. It also gave its customers the right to withdraw deposits at any time. The Washington Savings and Loan Association began to advertise heavily and new customers responded. By , the number of accounts jumped almost seven-fold. It was now the state's largest savings institution. Frazier and the bank also started lobbying hard in Olympia for new legislation establishing a true mutual savings bank structure.
It took five years, but the legislation finally passed. It was the first mutual savings bank west of the Mississippi. Depositors flocked to the new Washington Mutual; deposits increased 68 percent during the World War I years. It became the first bank in the state to loan money at reduced rates for purchasing war bonds.
The bank grew so fast it finally needed its own permanent home. It purchased the five-story Emily T. Walker Building on the northwest corner of 2nd Avenue and Spring Street in Seattle and turned it into a grand temple of finance, with marble columns and Renaissance-style terra cotta decorations.
About 20, people showed up to gawk on opening day, June 20, Washington Mutual continued to thrive through the s and began a program to serve another kind of saver -- the kind who own piggy banks. In , it started the School Savings Program, in which schoolchildren all over Seattle saved their pennies and nickels, brought them to school and then deposited them in Washington Mutual at a 5 percent interest rate.
Similar programs had been successful across the country, but Washington Mutual was the only Seattle bank willing to give it a try. It was an immediate, massive success. Within a month, half the schoolchildren in Seattle -- more than 21, — had opened accounts. They were encouraged to memorize a slogan which explained the glories of compounded interest: "Money makes money, and the money money makes makes more money" Morgan.
For Washington Mutual, it was a smart way to earn customers for life. Yet bank president Frazier believed it had other advantages as well. The next step will be the acquisition of property. And a nation of property holders is a nation free from the dangers of Bolshevism and every other form of internal disruption" Morgan. The Great Depression arrived in and caused the demise of many banks around the country. Washington Mutual had its share of scares.
The first came in February when an unrelated bank, Puget Sound Savings and Loan announced it would not open one Monday morning. This should have had little effect on Washington Mutual except for one thing: That bank had merged just a few months earlier with an unrelated entity called the Mutual Savings and Loan Association.
Washington Mutual depositors were so jittery that they saw the word "mutual" and panicked. When people were afraid a bank would fail, they had only one choice: Rush to the bank and take out their money by the bagful while there was still time.
Deposit insurance did not exist. Customers converged on Washington Mutual the next morning and began lining up to withdraw their money. The lobby was jammed; lines stretched outside to the sidewalks. Thousands withdrew large sums, hundreds closed their accounts. The run lasted another two days, but no one was turned away and cash was handed over cheerfully The bank's trustees had arranged for an emergency transfer of cash from New York to meet the demand.
The bank took the extraordinary measure of staying open late on one of those days to accommodate all the patrons. Actions such as these served to settle the depositor's nerves and the panic subsided.
Yet it subsided only briefly. In , Washington Governor Clarence D. Martin declared a "bank holiday" suspension of banking activities for two days, which set off another panic on March 1, The scene at the big building at 2nd and Spring was even more chaotic this time around. So many customers jammed into the marble-columned lobby that some actually fainted and had to be carried over the counter and revived. The doors were closed at 4 p.
An employee later described the scene:. All was quiet. The air was heavy with tension and fear. Customers wondered whether they were going to be paid. I will never forget that weird feeling. Frazier, who was a short man, stood on a desk to tell the customers not to be in a panic, all would be taken care of" Morgan. The last customers weren't paid until 9 p. The fifth was WaMu's moderate size. It wasn't big enough to be too big to fail. As a result, the U. On Sept. The next day, Washington Mutual Inc.
It was the second-largest bankruptcy in history, after Lehman Brothers. On the surface, it seems that JPMorgan Chase got a good deal. No other bank bid on WaMu. But Chase wanted WaMu's network of 2, branches and a strong deposit base.
The acquisition gave it a presence in California and Florida. It had even offered to buy the bank in March Bondholders, shareholders, and bank investors paid the most significant losses. Most shareholders lost all but 5 cents per share. Others lost everything. It said that WaMu knew they were fraudulent and should buy them back. Office of the Comptroller of Currency.
University of Washington. Accessed Oct. Federal Reserve Bank of St. National Home Price Index. California Association of Relators. Accessed October 12, Washington Mutual. Securities and Exchange Commission. Office of Thrift Supervision. Federal Deposit Insurance Corporation. The New York Times. Actively scan device characteristics for identification. Use precise geolocation data. Select personalised content. Founded in as Citizens Savings and Loan Society, the thrift operated as a savings and loan up until its acquisition by Washington Mutual, acquiring the Pullman Savings and Loan Association the year prior to the Washington Mutual acquisition.
With its base in Spokane and the newly acquired Pullman Savings and Loan adding a presence in Pullman, Citizens Savings and Loan represented an opportunity for Washington Mutual to expand into eastern Washington, but banking legislation at the time did not permit a mutual bank to merge with a savings and loan.
To clear this obstacle, Citizens Savings and Loan converted into a mutual bank in , as Washington Mutual had done 47 years earlier, changing its name to Citizens Mutual Savings Bank just prior to its merger with Washington Mutual. Once completed, the transaction extended Washington Mutual's presence beyond the greater Seattle area for the first time, giving the bank branches in Pullman and Spokane and establishing a pattern the Seattle-based concern would follow in the years ahead.
The year after the Citizens Mutual Savings Bank acquisition, Washington Mutual completed a similar deal when Liberty Savings and Loan Association converted into a mutual bank to facilitate its acquisition by Washington Mutual. The same scenario was played out in when the Grays Harbor Savings and Loan Association converted into Grays Harbor Mutual Savings Bank just before its acquisition by Washington Mutual, adding a branch office in Grays Harbor to the Seattle-based bank's growing empire.
Against the backdrop of these acquisitions, Washington Mutual expanded geographically through internal means by establishing branch offices on its own. Between and , the bank opened 15 branch offices in the Seattle area and in regions across the state, building itself into a dominant force in Washington State. Swelled by acquisitions and internal expansion, Washington Mutual entered the s as a venerable yet rising financial institution, its near-century of business in the Seattle area and two decades of statewide expansion generating considerable momentum for the decade ahead.
During the s, this momentum would not be checked, as the bank diversified quickly, entering new sectors of the financial industry at a yearly pace. Though industry observers would charge that the bank spread itself in too many directions during the decade, the far-flung expansion effected during the s proved to be the catalyst for Washington Mutual's animated growth during the s. During the s, the subsidiary companies that would compose The Washington Mutual Financial Group came into bloom.
The proliferation of diversified financial subsidiaries grouped under the Washington Mutual corporate umbrella began in when the bank acquired Murphey Favre, Inc. Beginning with these three subsidiaries, Washington Mutual formed or acquired a host of other operating companies that carried the bank into a variety of new business areas, including travel services, real estate partnerships, junk bonds, and commercial construction loans.
None of the subsidiary companies either acquired or formed during the s was more important to the future of Washington Mutual than the acquisition of Murphey Favre, a distinction entirely due to the arrival of a young Murphey Favre executive named Kerry K.
At the time of the acquisition, Killinger was 32 years old and had served as a securities analyst and investment broker for the company before being named executive vice-president. Once brought into the Washington Mutual fold, Killinger rose quickly through the bank's executive ranks, becoming president in and chief executive officer two years later.
During Killinger's rise, Washington Mutual was moving in a different direction, as the bank began to decline and suffer from waning profitability. With earnings slipping late in the decade, a new program aimed at restoring profitability and invigorating growth was launched, one that would dramatically amplify the magnitude of Washington Mutual's geographic scope.
During Washington Mutual's th anniversary year, the new strategy was adopted, a program of growth spearheaded by Killinger, who informed the Puget Sound Business Journal that in the coming years it was Washington Mutual's goal "to be the premier consumer bank in the Northwest. Once Killinger was named chairman of Washington Mutual in , the bank's bid to become the dominant financial institution in the region began in earnest, as the newly named chairman, president, and chief executive officer orchestrated an acquisition campaign that swallowed up competitors at a rate of about two per year.
For the first time in the bank's history, it extended its presence beyond Washington's borders, compensating for its belated entry into the regional banking arena by expanding aggressively at a time when the savings and loan industry in general was faring poorly.
These impressive figures would soon be dwarfed by the magnitude of the bank four years later, as Washington Mutual's acquisition spree ignited its growth, carried the bank into Montana and Utah, and necessitated the formation of Washington Mutual, Inc.
Meanwhile, the number of branch offices operated by the bank had increased dramatically, reaching a total of financial centers and 23 loan centers by the end of
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