Senate explores WaMu’s role in crisis
TEXT OF INTERVIEW
Stacey Vanek-Smith: It’s the largest bank failure in U.S. history — the collapse of Washington Mutual in 2008. The bank had more than $300 billion in assets, but was sold off to JP Morgan Chase for less than $2 billion. Now former WaMu executives are testifying before Congress about what happened. It’s part of an ongoing investigation into some of the bank’s seemingly shady mortgage lending practices. Here to talk WaMu with us is our very own Jeremy Hobson, he joins us live from New York. Good morning, Jeremy.
Jeremy Hobson: Good morning, Stacey.
Vanek-Smith: The Senate has been investigating Washington Mutual for a year and a half. What have they found?
Hobson: Well the official results of the investigation don’t come out until Friday, but we do know there will be charges of a pay system that rewarded loan officers for quality of loans, not quality, of bonuses for packaging up these risky mortgages into securities and selling them to financial institutions on Wall Street. That were ignored warnings on high default rates on these loans, and even charges of widespread fraud used to get people into mortgages that they couldn’t otherwise afford.
Vanek-Smith: Wow. The former CEO of Washington Mutual will testify today — any idea of how he might respond to some of these charges?
Hobson: Yeah, his prepared remarks have gotten out, and he says WaMu was just originating and selling all these risky adjustable-rate mortgages because there was a huge appetite for them. Now he says when it comes to the failure and the subsequent firesale of the bank to JP Morgan that WaMu didn’t get an opportunity to pursue other options — it was in a sense pushed into the deal by regulators who he says didn’t care about its future the way that they care about other Wall Street banks.
Vanek-Smith: How do regulators make out in the report?
Hobson: Not so great; nobody gets off easy here. It says the Office of Thrift Supervision, which was the main regulator of WaMu, didn’t sound the alarms until just before the bank failed, and the report faults the FDIC for standing on the sidelines while WaMu deteriorated. And Stacey, quickly, the reason all this matters is the Senate is about to take up this big financial regulatory overhaul bill, so this is really going to be on the minds of everybody as they go into that debate.
Vanek-Smith: Jeremy Hobson in New York. Thank you.
Hobson: Thanks.
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