The Five Dumbest Things on Wall Street: March 7
03/07/08 - 06:59 AM EST
Nat Worden
5. WaMu Moves the Goal Posts
Since the long-awaited congressional hearing on executive compensation practices in the housing bust is finally happening today, lawmakers may want to consider extending a last-minute invitation to someone from Washington Mutual's (WM Quote - Cramer on WM - Stock Picks) board of directors. With Wamu's stock down 70% over the last six months, the company's board has been busy finding new ways to reward its failed management at the expense of shareholders who have already lost big. The Seattle-based home lending giant said in a regulatory filing this week that it will calculate 2008 bonuses by considering factors such as operating profit and noninterest expense, without taking into effect housing-related loan losses and expenses tied to real estate foreclosures. This from a company that has been one of the hardest hit by the credit and housing busts, reporting a $1.87 billion loss for the fourth quarter alone. Those results included a $1.53 billion add-on to the company's reserves for future loan losses. The Wall Street Journal reported that WaMu's change in compensation policy "effectively shields the pay of chairman and chief executive of the thrift, Kerry Killinger, and more than 100 other executives from the continuing mortgage fallout." "They've cost their shareholders a lot of money," one shareholder told the Journal. "Bonuses should be given to the executives who enhance shareholder value, not destroy it." To be fair, Killinger turned down his 2007 bonus of $1.2 million because of the company's dismal performance, but according to the company's current plans, he stands to get a 2008 bonus equal to 365% of his base salary even if WaMu's mortgage-related losses get worse. All this comes as the issue of banking pay has become increasingly controversial and salaries in the industry have exploded in this decade compared with other sectors of the economy. And some of the biggest payouts have been made by the companies that are at the heart of the recent credit turmoil in structured finance and mortgage lending. The House Oversight Committee, chaired by U.S. Rep. Henry Waxman (D., Calif.), invited Countrywide (CFC Quote - Cramer on CFC - Stock Picks) chief Angelo Mozilo, former Citi CEO Chuck Prince and former Merrill Lynch (MER Quote - Cramer on MER - Stock Picks) CEO Stanley O'Neal to testify today on the subject of their lavish pay packages. The hearing has been delayed twice for scheduling issues, but if it finally happens, you can look forward to a discussion here next week.
Dumb-o-meter score: 68. Is it too late to get someone from WaMu at that hearing?
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