WaMu ousts CEO, faces US regulatory oversight

By Joseph A. Giannone and Jonathan Stempel

NEW YORK (Reuters) - Washington Mutual Inc WM.N, the largest U.S. savings and loan, ousted Kerry Killinger as chief executive and has been 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 and a former chief operating officer of Sovereign Bancorp Inc (SOV.N: Quote, Profile, Research, Stock Buzz), was named to replace Killinger, who had run the Seattle-based thrift since 1990.

Washington Mutual's expansion into subprime and other risky mortgages led to $6.3 billion in losses over three quarters, and caused the stock to lose nine-tenths of its value in the last year. The thrift has said losses from one-family residential mortgages could approach $19 billion through 2011.

"WaMu is facing unprecedented housing and market conditions," Chairman Stephen Frank said on a Monday 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."

Killinger, 59, joins Citigroup Inc's (C.N: Quote, Profile, Research, Stock Buzz) Charles Prince, Merrill Lynch & Co's (MER.N: Quote, Profile, Research, Stock Buzz) Stanley O'Neal and Wachovia Corp's (WB.N: Quote, Profile, Research, Stock Buzz) Ken Thompson among financial services chiefs to lose their jobs because of mortgage losses.

On Sunday, the chief executives of Fannie Mae (FNM.N: Quote, Profile, Research, Stock Buzz) and Freddie Mac (FRE.N: Quote, Profile, Research, Stock Buzz) were also replaced. Washington Mutual's board in June had stripped Killinger of his job as chairman, a role he had held since 1991.

Washington Mutual also cut 6,205 jobs, or 13 percent of the total work force, from January to June.

"It seemed like the writing was on the wall," said Chris Armbruster, an analyst at Al Frank Asset Management, which owns the thrift's shares. "A new leader may take the opportunity for write-downs to rid himself of baggage from former management. The change may indicate bigger write-downs to come."

Washington Mutual signed a memorandum of understanding with its chief U.S. regulator, the Office of Thrift Supervision, requiring improved risk management and compliance procedures.

It also agreed to provide a multiyear business plan to the regulator, including a forecast for earnings, asset quality and capital. Washington Mutual said the plan will not require it to raise capital, boost liquidity or cut products and services.

Washington Mutual shares fell 15 cents, or 3.5 percent, to $4.12 in Monday trading on the New York Stock Exchange. They are down 89.5 percent from the 52-week high of $39.25 set last September 19.

'NO DRAMATIC' DEPOSITS MOVEMENT

In an interview, Fishman said he plans to review "critical financial issues" over the next several weeks.

"We're not talking about radical changes. It's more execution issues, and the avoidance of errors," said Fishman.

Saying the Fannie and Freddie bailout may "dramatically change" U.S. mortgage lending, he added: "I reject the principle that by changing the business model, you're going to slow down growth."  Continued...