Decimated WaMulians would find some comfort in knowing that all the pain will fashion some good. Unfortunately, the financial-overhaul bill moving through the Senate would not have prevented a WaMu disaster.

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Listening to Washington Mutual executives testify Tuesday before a Senate panel, they didn’t seem like the Smartest Guys in the Room, much less Masters of the Universe. Other words come to mind: shifty, incompetent, ignorant, defensive, delusional. …

Former CEO Kerry Killinger used the Charlie Keating defense, for the disgraced S&L kingpin who two decades ago also blamed regulators for his troubles.

In WaMu’s case, it has a kernel of truth: Regulators who later decided to use taxpayer money to save institutions just as badly run let Washington Mutual go down in September 2008. They also failed to protect it that summer from the short selling by which the Wall Street boyz profited from helping to start a bank run.

Obviously WaMu had a healthy core banking unit that could have been kept as an independent institution. Instead, regulators opted for more consolidation, letting the well-connected Jamie Dimon at JPMorgan Chase snap it up at a bargain price.

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I’m not optimistic, but this double-standard of the rescues applied during the Great Panic would be a useful line of questioning when regulators testify Friday.

Still, Killinger built WaMu into a dreadful case study of much that is wrong in finance: incentives for risky, unsustainable growth; deterrents for those who warned about shoddy lending practices and risk; merger lust without the competence to handle the acquisitions; too little effort or capital expended to provide the loans for a productive, real economy.

He didn’t act alone. The shadow banking system and Wall Street bundled the mortgage time bomb into worthless securities and sold them to investors, making big money. Regulators allowed WaMu to reach that “Oh, my god” moment in the movie “The China Syndrome.” And WaMu directors failed the most basic tests of corporate governance.

Funny, they’re all doing fine. So are the big banks and shadow-banking outfits with the insatiable appetite for risky mortgages to package as candied snacks for gullible investors. And so, too, are the rating agencies that stamped these swindles as healthy and wholesome.

Washington Mutual’s shareholders, many average people who had invested out of loyalty to the Northwest, lost everything. In Seattle, a major headquarters was wiped out, along with thousands of jobs and economic devastation that moved out in concentric circles (vendors, lawyers, CPA firms, advertising, etc.) that have yet to be counted.

Washington Mutual’s collapse is a big factor behind downtown retailing troubles as well as the office-vacancy rate. Seattle is no longer a major financial center, and the brain drain is real and serious.

It would be some comfort to know that all this pain will fashion some good. Unfortunately, the financial-overhaul bill moving through the Senate would not have prevented a WaMu disaster.

It leaves largely untouched the powerful shadow-banking system, barely regulated, opaque and where much of the mischief originated. (To go further, I’m sure some hedge funds and other players wouldn’t touch WaMu debt back in the day, but average investors didn’t have that heads up to calamity.)

Derivatives, another prime driver of the financial collapse and many of which were worthless once the roulette wheel stopped, are also unlikely to be truly regulated or, in appropriate cases, outlawed.

Compensation overhaul gets a bare nudge. So the incentives for executives to be dumb and go for short-term growth, whatever the dangers to the institution and the economy, will remain. Similarly, real corporate-governance change, which would give average shareholders power and even separate the jobs of chairman and chief executive, won’t happen.

Watching the executives alternately squirm and sit dumbfounded, with thought bubbles that said, a la Bugs Bunny, “Think fast rabbit!,” one other thing became clear. Banking has become far too complex. Dangerously complex. Even the bankers, from Robert Rubin to Kerry Killinger, don’t understand it.

Their lack of understanding has so far lacked any consequences. For them, at least. You and I will be paying for it a long time.

You may reach Jon Talton at jtalton@seattletimes.com