By Sara Lepro
Associated Press
Tuesday, September 9, 2008; D05

NEW YORK, Sept. 8 -- Washington Mutual, ravaged by losses from sour mortgages, replaced Kerry Killinger as chief executive Monday, adding him to the growing list of banking bosses ousted by their boards. Its shares fell 3.5 percent after dropping as much as 24 percent earlier in the session.

Killinger, 59, is being replaced by Alan H. Fishman, the former president and chief operating officer of Sovereign Bank and president and chief executive of Independence Community Bank.

Also Monday, WaMu, the nation's largest savings and loan, said that it has entered into a memorandum of understanding with the Office of Thrift Supervision concerning aspects of its operations. WaMu has committed to provide the OTS with an updated, multiyear business plan and forecast for its earnings, asset quality, capital and business segment performance. The plan will not require the company to raise capital or increase liquidity, WaMu said.

Battered by rising mortgage delinquencies and defaults, and by the sinking value of its mortgage portfolio, WaMu has lost nearly 70 percent of its market value this year.

Killinger, who was stripped of his chairman title in June, became chief executive of the Seattle-based thrift in 1990 and built WaMu into one of the country's largest banks. But with a heavy focus on subprime and option adjustable-rate mortgages -- the types of mortgages at the heart of the housing bust -- WaMu's losses began to mount and its shares plummeted, sparking an outcry from shareholders.

The board's splitting of the chief executive and chairman roles in June was an effort, at the urging of shareholders, to improve corporate governance.

But Killinger -- who received compensation valued at $14.4 million in 2007 -- held on to his post as chief executive, even as the list of other top banking executives shown the door continued to grow.

Killinger's exit follows that of Wachovia CEO Ken Thompson, Merrill Lynch's Stanley O'Neal and Citigroup's Charles Prince.

Fishman, 62, became president and chief executive of Brooklyn, N.Y.-based Independence in 2001. He later served as president and chief operating officer of Sovereign Bank after the Philadelphia-based bank bought Independence for $3.6 billion in cash in 2006.

"The board has great confidence in Alan's ability to lead WaMu," said Chairman Stephen E. Frank in a conference call with analysts, "and to return the company to profitability as quickly as possible."

Most recently, Fishman has served as chairman of commercial mortgage brokerage Meridian Capital Group.

While the management change may be long overdue, few are convinced that it will prove a quick fix to the bank's ongoing problems.

Fishman said it's too early to comment on whether the bank will pursue any asset sales. Among his priorities is growing the bank's retail franchise.