Killinger is leaving the nation's largest thrift after months ofpressure from shareholders who are upset that the company's shareprice has fallen approximately 90% over the past year. The59-year-old ended a 17-year term as the company's chairman in Juneand had watched the same fate befall his peers at Citigroup Inc.,Merrill Lynch & Co. and Wachovia Corp. Killinger's replacementis Alan Fishman, 62, who last year left the nation's second-largestthrift, Philadelphia-based Sovereign Bank, to become chairman ofthe New York City-based commercial mortgage broker Meridian CapitalGroup.

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With regard to its regulatory issues, a source with the OTF saysthe MOU is "an agreement on actions to correct some situations wehave found to be inadequate or less than optimum" but declined toprovide any additional information. WaMu said the regulatorywarning is related to its risk management and compliance functionsand that it will provide regulators with a current multi-yearbusiness plan and forecast for its earnings, asset quality, capitaland business segment performance.

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Federal banking regulators have increased the number ofstruggling banks they have effectively put on probation forinadequacies in the business practices, and also has been issuingmore guidance. Last week, the OTS issued guidance about managingprograms offering home equity lines of credit in response to anincrease in banking institutions curtailing, suspending orterminating customers' home equity line of credit."[The] guidanceemphasizes that institutions taking such actions must comply withfederal laws and rules designed to protect customers," states theOTS. "While sound underwriting and effective risk managementsystems are essential, associations must employ these strategies ina manner that complies with applicable consumer protection laws andregulations."

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One year ago today, the company's share price stood at $35.02.In early afternoon trading Monday, shares of Washington Mutualstood at $3.60, down 15% on the day and down nearly 90% over thepast 12 months. Analysts have described WaMu's financial positionas among the worst of any major U.S. financial institution. Thecompany has laid off some 3,000 workers this year and more layoffsare possible as the company looks to weather the credit storm.

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Killinger built WaMu into a mortgage lending and consumerbanking powerhouse through a series of mergers in the 1990s. Histenure also included an aggressive retail expansion that ultimatelyneeded to be reined in, questionable mortgage-hedging decisionsthat limited profits during a boom in mortgage issuance and,lastly, a move into subprime mortgages that included manyill-qualified borrowers.

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WaMu board chairman Stephen Frank says Fishman "is the idealexecutive to succeed Kerry Killinger and lead WaMu through itscurrent challenges…at this critical juncture." Fishman says heintends "to hit the ground running here in Seattle with a focus onbuilding on WaMu's strengths, addressing its weaknesses, andreturning the company to profitability as quickly as possible."

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Fishman joined Sovereign in 2006 when it acquired IndependenceCommunity Bank, a leading community bank and multifamily lender inthe New York area for which Fishman had been president and chiefexecutive since 2001.

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With regard to its MOU with the Office of Thrift Supervision,WaMu said one of the deficiencies identified has to do with itsBank Secrecy Act compliance program. Congress passed the BankSecrecy Act in 1970 as the first laws to fight money laundering inthe US. The BSA requires businesses to keep records and filereports that are used by law enforcement agencies, both domesticand international to identify, detect and deter money launderingwhether it is in furtherance of a criminal enterprise, terrorism,tax evasion or other unlawful activity. The general rule has beenthat you must report cash payments over $10,000 but the rules havebeen expanded and are being enforced more readily since the passageof the USA Patriot Act in October 2001.

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WaMu's headquarters are located at 1301 Second, Ave. in DowntownSeattle. Its 944,000-sf headquarters office tower and attached700-stall parking garage were completed in 2006. At that time thecompany also leased an additional 243,000 sf of contiguous officespace from the Seattle Art Museum, a joint venture partner inWaMu's headquarters project, and let some other leases lapse. As ofthe start of the year, the company leased an additional 697,000 sfin other downtown Seattle locations for administrative functions,owned or leased 2,490 retail banking and lending centers, and ownedor leased 290 administrative offices in 36 states. The breakdown ofthe non-Seattle administrative operations includes 2.6 million sfin California, 1.1 million sf in Texas, 825,000 sf in Florida and463,000 sf in Illinois.

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