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American Banking Bunko: The WaMu Mob Gets The Loot

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What is a CEO? A Chief Executive Officer is an employee; granted, the “top” employee of a corporation, the one who, theoretically, has the overall performance and reputation of that corporation resting upon his shoulders.

What is a Bank? A bank is a very specific kind of corporation; one which commands its customers trust more than any other company with which they conduct business, because the bank is entrusted first and foremost with holding and protecting their money.

It is only in this upside-down, through-the-looking-glass time in which we are living that criminal mismanagement and risk taking is the “conservative” norm, and, in which bank CEOs are rewarded for heretofore inconceivable losses of money (your money). The swindle this week (and there is no other word for it) is critically newsworthy, as it turns out – because it is filled with details that you need to know, because you must decide if this is where you want to or should trust to keep your money.

Washington Mutual is the largest savings bank in the United States. The CEO of Washington Mutual, Kerry Killinger, as well as the top executives supporting him, have constructed a most extraordinary compensation system for themselves: In spite of the fact that WaMu (and lemme tell you how I much abhor that tacky self-constructed moniker) is, as I write, hemorrhaging $25 million a day in bad mortgage loans, these executives will have their bonuses calculated on the business of the bank exclusive of the mortgage losses!

According to Bloomberg, Mr. Killinger is eligible in 2008 for a bonus package equal to 365 times his salary, which itself was $1,000,000 (in 2006). The way this particular bunko scheme is designed, 2,900 of Washington Mutual’s nearly 50,000 employees will be eligible for this bonus calculation scheme, however, only Mr. Killinger’s share may amount to $365 million. The rest of them are more subject to stock options. Of course under their stellar management, the company’s stock has fallen to about $11 per share from a one-time high of nearly $50 per share just two years ago. So much for the value of their stocks – but, then, in what political environment are business ethics so utterly dispensable that there could even be a discussion of the head of a bank earning a million dollars a day for every day of a year in which the bank is losing billions?

Where is the “bunko squad”? Where is the FDIC? The SEC? The FBI? The House Banking Committee? After watching these parasites, the heads of Merrill Lynch, Citigroup, Countrywide – all given hundred million dollar farewell gifts after losing tens of billions on their watch – when they should’ve been led off in handcuffs; now reading of the twisted accounting that is afforded this bank CEO (and just enough of the lesser executives for them not to kvetch about it), I was glad to see the analysts at Egan Jones rating service describe this as, “… outrageous to insulate management from the disastrous effects of the mortgage crisis”

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It is outrageous indeed. And you should be deeply concerned about keeping accounts with that bank, or any of these banks that are rewarding the very men who are and have been creating the collapse of the entire world’s financial markets. And what they have been up to is no less than just that. These executives are going to live like sultans while accountholders will be left with pennies on the dollar if it ends up in the hands of the FDIC.

It is now inconceivable to leave large sums of cash (especially dollars) in any bank whose recklessly imprudent participation in bundled loan security schemes have left the depositors savings at risk; beyond a safe deposit box – to hold precious metal coins – there is no sense in keeping cash in any account that these criminal executives can get their hands on, in the name of “compensation” (Is that what they call it nowadays? In early Warner Bros. movies it was just referred to as “the loot”)

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Michael Fox is a writer and economist based in Los Angeles. He has been a corporate controller, professor, and small business entrepreneur. After a life-altering accident, he spent five years learning more about medicine and the healthcare (more...)

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