WaMu ousts CEO, put under U.S. regulatory oversight

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(Reuters)

By Joseph A. Giannone and Jonathan Stempel

NEW YORK (Reuters) - Washington Mutual Inc , the largest U.S. savings and loan, ousted Kerry Killinger as chief executive and was put under special regulatory supervision following skyrocketing losses from mortgages that are expected to weigh on results for years.

Alan Fishman, 62, chairman of mortgage broker Meridian Capital Group, was named to succeed Killinger, who had run the Seattle-based thrift since 1990.

Killinger, 59, joins Citigroup Inc's Charles Prince, Merrill Lynch & Co's Stanley O'Neal and Wachovia Corp's Ken Thompson among chief executives to lose their jobs because of mortgage losses. On Sunday, the chief executives of mortgage finance companies Fannie Mae and Freddie Mac were also replaced.

"WaMu is facing unprecedented housing and market conditions," Stephen Frank, the thrift's chairman, said on a conference call. "The board felt that new leadership with a combination of deep industry experience and a fresh perspective would be the most effective way to lead the company."

Washington Mutual's board had stripped Killinger of his chairmanship earlier this year, a post he had held since 1991.

In morning trading, Washington Mutual shares were up 52 cents, or 12 percent, at $4.79 on the New York Stock Exchange. Bank shares advanced broadly after the U.S. government took control of Fannie Mae and Freddie Mac.

Killinger, whom Frank called a visionary, expanded Washington Mutual into one of the largest U.S. consumer lenders, with $309.7 billion of assets and 2,239 branches.

The expansion, however, saddled the thrift with tens of billions of dollars of subprime, adjustable-rate and other risky mortgages on its balance sheet.

Washington Mutual said it signed a memorandum of understanding with its chief U.S. regulator, the Office of Thrift Supervision, that requires it to improve its risk management and compliance.

It also agreed to provide a multiyear business plan to the regulator, including a forecast for earnings, asset quality, capital and business performance.

Washington Mutual said the plan will not require it to raise capital, increase liquidity or make changes to products and services.

LOSSES MOUNT

In July, Washington Mutual posted a quarterly loss of $3.33 billion and said losses in its one-family residential mortgage portfolio could approach $19 billion through 2011. Its shares have tumbled from a 52-week high of $39.25 last September 19.

Earlier this year, the thrift raised $7.2 billion from investors led by private equity firm TPG Inc .

This followed a rejection of a $7 billion takeover by JPMorgan Chase & Co , a source told Reuters at the time. Washington Mutual also eliminated most of its dividend.

Fishman joined New York-based Meridian in 2007. Before than, he was president and chief operating officer of Sovereign Bancorp Inc , the second-largest U.S. thrift.

He previously ran Independent Community Bank Corp, a Brooklyn, New York, lender that Sovereign bought in 2006 for $3.6 billion.

"I know I need to hit the ground running," Fishman said on the conference call. "Clearly, I share the board's confidence in WaMu's underlying strength." He also said "it's way early" to speculate on possible asset sales.

Fishman will receive a $10 million signing bonus, of which $2.5 million is in performance-linked stock. His salary will be $1 million, with options to buy 5 million shares.

(Additional reporting by Paritosh Bansal; Editing by John Wallace)