Sen. Levin's committee poised to assess blame for WaMu failure beginning Tuesday
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Washington Mutual, or WaMu, was the largest thrift failure in the United States. Thoroughly polluted with toxic loans made to bad credit risks and bogus securitization, WaMu was taken over by the government and sold to J.P. Morgan Chase & Co. in September 2008. It had $300 billion in assets.
Now, Levin wants to find out whom to blame for its failure.
Tuesday kicks off four hearings on the WaMu debacle, and Levin's committee has examined millions of pages of documents and is ready to present what looks like millions of exhibits and internal e-mails.
“Washington Mutual built a conveyor belt that dumped toxic mortgage assets into the financial system like a polluter dumping poison into a river,” Levin said in a statement. “Using a toxic mix of high risk lending, lax controls and destructive compensation policies, Washington Mutual flooded the market with shoddy loans and securities that went bad. Examining how Washington Mutual operated, and what its insiders were saying to each other, begins to open a window into the troubling mortgage lending and securitization practices that took our economy over a cliff. As the debate on financial reform begins, it is critical to acknowledge that the financial crisis was not a natural disaster, it was a man-made economic assault. Our hearings on the financial crisis will help provide a public record of what went wrong, who should be held accountable, and the ongoing need to protect Main Street from the excesses of Wall Street.”
Here is a sample of one of the internal e-mails from WaMu that Levin's committee has obtained:
"Short story is this is not good. ... Large potential risk from what appears to be a recent increase in repurchase requests .... We are all rapidly losing credibility as a management team."- David Schneider, head of WaMu's home loans division, Dec. 2006.
Levin's committee will probe WaMu's "teaser rate" mortgages, which could eventually end in negative amortization, i.e., the home loan actually growing in size as the years went along, naturally leading to defaults.
Levin will hit WaMu on six key points:
-- High-risk lending strategy.
-- Shoddy lending practices.
-- Steering borrowers to high-risk loans.
-- Polluting the financial system.
-- Securitizing delinquency-prone and fraudulent loans.
-- Destructive executive compensation.
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April 12, 2010; 6:04 PM ET
| Tags: Carl Levin, Financial crisis, JPMorgan Chase, Natural disaster, United States, United States Senate, Wall Street, Washington Mutual
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