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Spokane, Washington  Est. May 19, 1883
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A meltdown you can take to the bank

My favorite New Yorker cartoon of the post-meltdown era depicted a woman talking to a man in a suit.

“A banker, eh?” she said. “Can you make a living at that?”

I laughed at this far more than I should have, for two reasons. First, we liberal arts majors have been tortured with that line since college, along with its condescending variations.

“You say you’re a history major? (Eyes narrowing) Any money in that?”

Now, finally, we’re in the same boat with all of those people who chose practical, sensible professions – financiers, hedge-fund managers, computer software designers, stockbrokers and yes, even bankers.

That’s the second reason I laughed at this cartoon so much. It encapsulated the colossal, Titanic-vs.-the- iceberg scale of our economic disaster in just a few well-chosen words.

When even the bankers can’t make a buck, well … man the lifeboats!

The banks and investment banks were the first to founder during the Great Financial Meltdown of 2008-2009. The biggest of all was my own bank, Washington Mutual.

It ceased to exist last September. Yet I cannot summon up the proper words of condolence, because its wounds were entirely self-inflicted. For more than 100 years, Washington Mutual was a cute little local bank, based in Seattle, known for being careful and conservative. Then, in the last 10 years, it injected itself with steroids – a needle right into the old bank vault – and turned itself into WAMU, the country’s largest savings-and-loan.

It aggressively pushed a home loan product it called the Option ARM (Adjustable Rate Mortgage). This loan was so flexible and cuddly, it let customers choose their own payment. What a deal!

Guess what? People chose the lowest possible payment, which meant they sometimes weren’t even paying off the interest.

This, along with the bank’s enthusiasm for subprime loans, sank Washington Mutual forever last fall. The bank had, I’m afraid, shot itself with its own ARM.

After months of bad news about bad loans, customers finally performed the 21st century version of a bank run. They logged onto their online accounts and, in one week, quietly withdrew $16.7 billion in deposits. The bank then experienced what regulators delicately termed “severe liquidity pressure.” You and I might call it “running out of money.”

It was the largest U.S. bank failure in history. Thanks to the munificence of the federal government and JPMorgan Chase, which stepped in immediately and bought it, none of WAMU’s depositors lost a dime (although its stockholders weren’t quite so fortunate). So now, I’m a customer of JPMorgan Chase & Co., which, I suppose, will work out fine assuming they treat my $404 savings account with the proper reverence.

Still, I can’t help but feel a twinge of sorrow at the demise of Washington Mutual. This is a bank that survived two runs during the Great Depression. The bank’s own president stood on a desk in 1933 and promised the panicked crowds that “everyone would get their money.” And they did. Yet the bank could not survive that quieter, stealthier run last fall.

When bank robber Willie Sutton was asked why he robbed banks, he famously replied, “Because that’s where the money is.”

What an outdated notion that is. Today, money is mostly electronic, a number on a computer screen, a wisp of financial vapor. No wonder bankers have been able to make it disappear so fast.

Still, it’s hard to get used to this new financial world: Banks are where the money ain’t.

Jim Kershner can be reached at (509) 459-5493 or by e-mail at jimk@spokesman.com.
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