Seattle Soundings

The big uneasy economy

For years, self-aggrandizing local politicians have had, as one of their favorite memes, the desire to ensure that Seattle is a "World Class City." What it means to be a "World Class City," and what the criteria are for becoming one, are never really spelled out. Usually it involves building sports stadiums or other civic amenities, or giving big tax breaks to developers and huge corporations. In other words, world-class cities throw other people's money around like it's no big deal.

So now that Seattle has become the site of the biggest bank failure in U.S. history -- and given America's wealth, that unquestionably means our city has just spawned one of the biggest, maybe the biggest, bank failure in all of human history -- we must be a world class city after all.


Unless, of course, we just happen to live where a cluster of really, really greedy bankers also happen to live. I suppose that's a less charitable way of looking at it.

At this writing, the House has rejected the Bush administration's $700 billion Wall Street bailout proposal. That's a start toward a saner financial environment that actually updates regulatory infrastructure to accommodate the vast technological innovations that have made Ponzi schemes like Enron and WaMu possible. But it's only a very tentative start, and there's still plenty of pressure to bum rush Congress into doing something stupid -- like rewarding the folks who created the mess, and leaving their victims to rot.

Fortunately, Wall Street is an actual physical location, and so popular culture isn't likely to notice that playing fast and loose with gravity ("See? We threw the ball up! It hasn't come down yet! That proves it'll keep rising forever!") seems to be Seattle's special contribution thus far to the 1st Century zeitgeist. Starting with the late '90s dot-com boom, there has been a lot of self-admiring hokum written locally (and more than a bit nationally) about how Seattle, symbolized by Microsoft and Starbucks, was the American city that best epitomized the new global economy.

Have we learned anything yet? We know what happened with the dot-com boom, er, bubble, er, bust. Microsoft spent a fortune in court trying to prove it wasn't a monopoly, but in retrospect those monopolistic practices were all that's kept it afloat (so far) in a world full of vastly superior software competitors. (One word will suffice: Vista.) And Starbucks has finally figured out that opening franchises on three corners of the same intersection is not a viable long-term business strategy.


Just be thankful for 1999's WTO protestors. Otherwise, the current global crisis would all be tied in with a deregulatory free trade structure called the "Seattle Round."

Add to this WaMu. Most locals probably didn't notice how, in a few years, a medium-sized local savings bank became one of the country's largest financial institutions. And little wonder; most of the local business media coverage was so dripping with admiration that it failed to note that the company was financing its acquisition of competitors large and small by selling, essentially, snake oil minus the oil. Even in the past few weeks, in the breathless reporting of how Washington Mutual was trying to save itself (and, when it didn't, what the future might bring), virtually nobody has noted that WaMu deserved to fail. More specifically, former CEO Kerry Killinger -- who headed the bank for 18 years until his last-minute ouster this summer -- and his team, who jumped on the 1999 deregulation of the financial services industry, deserved to fail. They didn't, of course; Killinger, for example, can retire quite nicely on his ruined reputation and the $54 million in compensation WaMu has paid him in the last five years alone.

Me? I'd be happy to be unemployable with tens of millions under my mattress -- where it was safe from people like Killinger. He made out just fine. The people paying the price for his greed are WaMu stockholders, including the folks whose pension funds, 401ks, and mutual funds invested in Killinger's company, are now holding worthless stock.

[[In-content Ad]]