Similar secrecy surrounds other bank failures. As the toll of closed banks mounts—more than 140 have been shut by regulators since the housing bubble burst in early 2008—and as Congress prepares to overhaul the regulatory structure, more people are asking what exactly was wrong with these banks, and whether regulators always acted appropriately in closing them.

After regulators shut down First Bank of Idaho in April, for example, congressmen Mike Simpson and Walt Minnick said regulators had “intentionally destroyed” a pillar of the community “through inappropriate use of their powers.” The Idaho lawmakers asked why regulators acted so abruptly when the bank was close to raising a needed $10 million.

“We are concerned that the OTS and the FDIC did not give the bank enough time to capitalize properly, even though it is our understanding that they were nearing the end of negotiations with a willing investor,” they wrote in a letter to the agencies. “Not only have investors lost millions in personal investments, but many of the businesses that have banked with First Bank of Idaho for years have found their credit lines frozen.”

The FDIC and OTS responded by providing the official reasons for closing the bank, but no new details, according to Simpson’s office.

It appears that Washington’s two senators didn’t seek much more information about WaMu—and they have not responded to requests for comment. However, in October, Governor Chris Gregoire questioned why regulators failed to approve a plan to recapitalize Everett-based Frontier Financial, the state’s largest commercial bank, through a merger. The deal fell apart and the bank is still seeking crucial capital.

Some see a much broader and more worrisome effect from the government’s discretionary and murky process. As one WaMu executive put it: “If you’re a shareholder in any bank you’d have to really look at it and say, ‘What are the parameters here? Can they just seize any bank at any time?’”

Widespread Problems and Pain

The closures have had enormous repercussions. Had regulators acted differently in WaMu’s case, they might have preserved at least some of the $7 billion in shareholder wealth that remained just before the seizure, and tens of billions more in bondholder wealth. If WaMu executives had been able to sell the bank to a healthy financial institution, as they were energetically trying to do, far more wealth—perhaps $30 billion more—would have been revived as bank stocks rose with the tide of a surging stock market during the spring and summer of 2009.

Instead, tens of thousands of WaMu investors lost everything—retirement dreams, college savings, endowments for schools and churches—and they continue to suffer that hardship today. Many of WaMu’s past employees and the 43,000 left when the bank closed held substantial amounts of stock that became worthless.

Calls and letters flooded into the FDIC and WaMu’s bankruptcy lawyers. On the day after WaMu’s closure, the FDIC fielded more than 320 calls, according to records released by the agency. “They are calling the office demanding that the chairman intervene,” the chief of staff of FDIC Chairman Sheila Bair wrote in an email.

Wrote one angry investor: “Your agency took over Washington Mutual and left countless investors in both the common and preferred stock out to dry. I knew going into the stock there was going to be risk. But I would rather that the market itself dictated that risk and hope that government intervention would not change that process for me.”

“As a small investor and citizen of this country, I would like to ask you: Are you going to do anything to help me recuperate some of my retirement money?” asked Luis Osorio, another investor. A 73-year-old native of Peru, he lost his lifetime savings, $202,000, which he had invested in WaMu shares.

“I need help!”