FDIC sues ex-WaMu execs, wives over bank's failure

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WILMINGTON, Delaware (Reuters) A U.S. government regulator sued Kerry Killinger and 2 other Washington Mutual Bank executives accused of pioneering reckless home loans that led to biggest bank failure in U.S. history.

The 3 "gambled billions of dollars of WaMu's money" by rewarding workers and themselves for shoving risky, low-teaser rates loans while ignoring warnings about the housing foam,wholesale Womens Polo, the Federal Deposit Insurance Corp said in its lawsuit.

When the bubble began to burst, Killinger and former Chief Operating Officer Stephen Rotella were alleged to have quietly transferred their wealth to their wives, in an venture to put it further the reach of creditors.

The lawsuit also named their spouses as defendants, which one lawyer who specializes in banking regulatory materials phoned "truly combative."

The third former executive was David Schneider, the sometime president of the company's home loans division.

U.S. banking regulators have licensed lawsuits opposition 158 bank officials so far as they seek to regain at least $3.6 billion in losses from bank failures related to the 2007-2009 monetary crisis.

Founded in Seattle in 1889, Washington Mutual was the largest U.S. savings and loan, with more than 2,000 branches, $300 billion of assets and $188 billion of deposits while it was seized at the altitude of the 2008 financial panic.

The bank was swiftly sold to JPMorgan Chase & Co for $1.88 billion,wholesale Wedding Dresses In Color, and the parent corporation Washington Mutual Inc (WAMUQ.PK) landed in bankruptcy the next daytime.

The regulator said the executives had a "fixation ashore short-term profits" and a desire to gobble up mall share in precarious loans, such for mortgages with one option to make minimal initial remittances, despite noisy warnings from hazard directors.

The lawsuit accused the three, who collected $95 million in compensation between 2005 and 2008, of gross delinquency and rift of fiduciary obligation.

Killinger has accused regulators of jumping the pistol in shutting down the bank.

"It was usual magnificent impact and sadness namely I read of the seizure," he told a congressional plate final year.

In the weeks guiding up to the seizure, the FDIC said Killinger and Rotella were transferring assets to their wives to avoid creditors.

Killinger transferred his ownership interest in his Palm Desert, California, and Shoreline, Washington,wholesale Sexy Lingerie, homes to his wife Linda, meantime Rotella transferred extra than $1 million apt his wife Esther.

Both women are being sued for fraudulent vehicle.

"I really haven't seen that," said James Rockett, an attorney with Bingham McCutcheon in San Francisco, of the naming the wives as defendants. "It's really aggressive."

The FDIC has not brought numerous lawsuits at present in the present wheel of bank failures, and Rockett said there may have been some reluctance to sue later the agency's experience in the 1990s emulating a previous wave of bank failures.

Rockett noted that in common, the recoveries from the lawsuits brought against directors in the before cycle were considered to be on the light side, given the costs.
"That's why they may be somewhat reluctant to push in this cycle," he said.
Joe Garrett, of Garrett Watts & Co which provides risk management for banks, noted that regulators were occasionally seen as abusive of their powers in their elapse pursuits.
Rotella may have had that on his idea in a letter sent to the media.
He called the lawsuit "unfair and an damage of power. I deem this may be a way for the FDIC to gather a payment from insurers who catered officers and directors responsibility coverage for the period they went by WaMu," said the letter.
He likewise eminent it was unjust for the FDIC to reproach executives for not watching the coming housing breast, which he said the agent also did not expect.
Washington Mutual Inc declined to comment. Attorneys for Killinger and Schneider did not immediately return a call questing comment.
The FDIC said it does not comment on characteristic litigation.
The case is The Federal Deposit Insurance Corp as receiver of Washington Mutual Bank, v Kerry K Killinger, Stephen J Rotella, David C Schneider, Linda C Killinger and Esther T Rotella, U.S. District Court, Western District of Washington, No. 11-459.
(Additional reporting by David Clarke in Washington; Editing by Bernard Orr)