Kerry Killinger, CEO of embattled Washington Mutual, had some quips for the Rotary Club of Seattle this past week, but he had no mea culpas...
Kerry Killinger, CEO of embattled Washington Mutual, had some quips for the Rotary Club of Seattle this past week, but he had no mea culpas.
“I’m having kind of a strange experience these days,” he told a crowded downtown hotel ballroom full of Rotarians. “I consistently have friends, colleagues, and even family members come up to me and say, ‘Kerry, how are you?’ “
When he reassures them that he is doing fine despite the stock’s plunge and WaMu’s deep losses, Killinger recounted, “They’ll say, ‘You know, you look better than I thought you would.’ “
He also joked that before the bubble burst, the trend of securitizing and reselling mortgages and other financial instruments got so out of control that “I think you guys could have gone out and securitized your coats and pants and shirts — somebody might have bought it.”
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But when it came time to reflect on a crisis that he said tops anything since the Great Depression, Killinger seemed to blame every corner of the financial system except his own:
“Some would say the Federal Reserve — they brought interest rates down to 1 percent and that helped fuel things. Housing speculators got into the game. … There’s no question that there was a loosening of underwriting standards on some parts; there’s no question that there were some irresponsible brokers, out marketing products to people that may not have been appropriate.
“How about the government?” Killinger continued, noting it had encouraged more widespread homeownership. And, he said, “There was also an element of irrational money flooding housing from Wall Street.”
Yet Killinger, who this month lost the title of WaMu chairman that he’d held for 17 years, defended Seattle-based Washington Mutual’s own record of lending.
“What has been particularly challenging for a bank like WaMu is that the high lending standards that we’ve maintained for decades still resulted in unexpectedly high loan losses. … When housing prices decline by up to 35 percent, even conservatively underwritten loans can perform poorly.”
That’s one way of looking at it. But while Killinger pointed out, accurately, that most of WaMu’s home loans were for 80 percent or less of the home’s value, he neglected to mention that the company’s loan book was heavily tilted to the kinds of loans most likely to go sour as soon as the housing boom went bust.
From 2005 through 2007, WaMu’s own filings show, the company made $614 billion in loans backed by real estate. Short-term adjustable-rate mortgages, subprime loans and home-equity loans made up just over half that amount — $313 billion.
If the crowd included any WaMu shareholders astonished to see their investment touch a 16-year low, they did not speak up.
Perhaps they were reassured by Killinger’s declaration that “of course it’s a tough time, but it’s also a time of true excitement and of being energized by all the initiatives that we have going on.”
Alarming problem sets off dueling Starbucks lawsuits
Espresso machines and Wi-Fi service aren’t the only things Starbucks is revamping. The Seattle-based coffee juggernaut is trying to change who monitors many of its store-alarm systems — but that’s proving more difficult than retraining baristas.
Dueling lawsuits filed this past week detail the rupture of a decadelong relationship during which ADT Security Services installed alarm systems at more than 2,400 of Starbucks’ 7,257 company-owned U.S. stores.
Starbucks tried switching some locations to another monitoring company in 2005, only to discover that many had ADT-installed security chips that won’t allow anyone else to reprogram the alarms remotely.
With a shifting roster of employees and frequent after-hours deliveries, Starbucks says it needs the flexibility to update the systems remotely. It claims that ADT and a predecessor firm consistently said they were installing alarms that were not proprietary.
Starbucks seeks $900 apiece to replace about 2,100 alarm panels — that’s approximately $1.9 million — plus triple damages. And it wants the court to force ADT to divulge the passwords Starbucks needs to remotely access the alarms.
ADT’s lawsuit argues the alarms can still be programmed by someone at the store, so the systems aren’t proprietary under the companies’ latest contract, signed in 2004.
If it does have to pay for replacing alarms, ADT says, the court should peg the price at $360, rather than $900. Furthermore, ADT doesn’t want to pay compensation for what Starbucks could have saved by switching to another monitoring company.
Burglars shouldn’t get any ideas — ADT says it is still monitoring the alarms.
But its suit says the coffee company hasn’t paid it for some time, and owes more than $413,000.
Saving buildings can save energy
Kevin Daniels, the Seattle developer who saved the old First United Methodist Church from the wrecking ball, offers another argument for preserving historic buildings: It’s greener than tearing them down and putting up something new.
Daniels, a trustee of the National Trust for Historic Preservation, used the century-old Methodist sanctuary in downtown Seattle to illustrate that point in remarks he delivered this past week to Commercial Real Estate Women (CREW) Seattle.
He estimated 80 billion BTUs of energy — the equivalent of 640,000 gallons of gasoline — was expended to build the historic church: extracting and manufacturing the materials, hauling them to the site, making them into a building.
Tear the church down, Daniels said, and all that energy goes to waste. Plus you create 4,000 tons of debris — enough to fill 22 rail cars — and expend still more energy getting rid of it.
Say you replace it with a green, energy-efficient office building of similar square footage. Even with those savings, Daniels said, it still would take 65 years to recover the amount of energy that went up in smoke with the old building’s demolition.
It adds up to another compelling argument for saving historic structures, he concluded: “There has to be something we can do with them.”
All this doesn’t mean Daniels wants to preserve everything. As part of the deal that saved the sanctuary, he was allowed to tear down the 1950 church annex next door to make way for a 660-foot office tower. That’s what’s subsidizing the sanctuary’s preservation.
The annex is rubble now. Daniels said he’ll start digging the hole for the new Fifth and Columbia Tower in a couple of weeks, as soon as the city issues a permit.
— Eric Pryne
Seattle Times business reporter Drew DeSilver contributed to this column. Comments? Send them to Rami Grunbaum: rgrunbaum@-
seattletimes.com or 206-464-8541