RIP Washington Mutual – A History of Ashes to Ashes

As Ira Hill Case looked out his soot-stained window, the view as far as he could see was ruin, darkness, destruction, and ashes – and he certainly must have wondered why he had been called here. Ira had a place to do his work – a single desk on the second floor of a downtown office building which he shared with a dozen other businessmen representing a dozen other businesses. But Ira was a one-man show – the only employee of a hastily-formed, loosely organized association – with little idea what he was supposed to do or how he was supposed to do it. A single man with a single desk, sitting at a cross-road in history.

Ira’s new job – his “mission” – was the result of another man’s mishandling of his own job: The afternoon of June 6, 1889, found John Back, an assistant in Victor Clairmont’s woodworking shop, hard at work. The shop floor was covered with wood chips, shavings, rags, and turpentine spills – just what you’d expect to find after a productive day of woodworking. Business was good, and with orders in hand, John had his large wood-glue pot in its usual place, sitting on the old gasoline-fired stove, and he was determined to knock out a few more projects before calling it a day.

Around 2:15 – Was John working too fast? Did the equipment fail? – the glue somehow boiled over, caught fire, and flames quickly spread to the piles of wood chips and turpentine-soaked rags. John leaped into action – trying to save his projects, alerting the building occupants, and attempting to fight the fire himself. Grabbing the fire buckets, he attacked the fire with water – which only served to thin the turpentine and spread the fire further. Soon, the entire shop was filled with flames and thick smoke.

By the time fire-fighters arrived, the flames had spread to Dietz & Mayer’s Liquor Store next door – which exploded in a huge fireball. The blast hit the neighboring Crystal Palace Saloon and the Opera House Saloon, and the combination of the abundant alcohol accelerants and the wood-constructed buildings in the downtown area were too much for the volunteer fire department to handle, victims of lousy equipment and no water pressure. Before the flames died down, 32 square blocks of early Seattle’s business district was reduced to ashes.

The Birth of Amortized Home Loans

This could have been the end of many cities, or at least a major setback, as residents and businesses would find it much easier to relocate rather than rebuild. But Seattle business leaders and city officials came together and formed “Washington National Building Loan and Investment Association”, and Ira was given his desk and his mission.

And Ira did something extraordinary: In Feb, 1890, more than 6 months after the fire, Ira authorized a $700 loan to build a home in Ballard. This home was well outside the “burn zone” and seemed to have nothing to do with helping rebuild the destroyed businesses, but this action helped fuel a residential building boom that quickly doubled the population of Seattle – which was exactly what the city’s businesses needed to rebuild, grow, and thrive.

That $700 loan was extraordinary because it is believed to be the very first “amortized” residential home loan ever. That amortized model was soon copied by the nation’s 3,500 other Building and Loans, and we soon entered an era where ordinary U.S. citizens were given a convenient lending tool they could use to purchase their own homes.

Today, amortized home loans are the norm – all over the world. In the aftermath of a devastating firestorm, this one-employee association created the idea that has helped millions of people own their homes, and it grew to become Washington Mutual Savings Bank. Recently, in the midst of a devastating financial firestorm, WAMU was seized by the FDIC, its 119+ years of independent operation over. JP Morgan, the new owner of WAMU, promises a seamless transition and business as usual. Still, I can’t help but feel saddened at the sudden loss of this “Friend of the Family” who helped millions of ordinary citizens buy their own home.

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