Here's a striking quote: “Washington Mutual built a conveyor belt that dumped toxic mortgage assets into the financial system like a polluter dumping poison into a river.”
That comes from Michigan Senator Carl Levin, chair of the Senate Permanent Subcommittee on Investigations, and it suggests pretty clearly what will emerge from the Senate banking scandal hearings starting today, which will be focusing on Washington Mutual.
But before absorbing the usual well-coached responses from the lineup of banking execs, give some thought to what was going on here. The press release announcing the hearing is so clear in its smackdown that we really need little else . . . other than some way of ensuring this sort of thing isn't allowed to happen again . . .
On Tuesday, the U.S. Senate Permanent Subcommittee on Investigations, under Chairman Carl Levin, D-Mich., and Ranking Member Tom Coburn, R-Okla., will launch a series of four hearings in April examining some of the causes and consequences of the 2008 financial crisis.
The first hearing will focus on the role of high risk mortgages, and feature Washington Mutual Bank, which was the nation’s largest thrift with more than $300 billion in assets, $188 billion in deposits, and 43,000 employees. Washington Mutual specialized in mortgage lending until it was seized by the government and sold to JPMorgan Chase in 2008. It was the largest bank failure in U.S. history. The Subcommittee investigation found that the bank contributed to the financial crisis by making hundreds of billions of dollars in shoddy, high risk mortgage loans, packaging them, and selling them to investors as mortgage backed securities.
“Washington Mutual built a conveyor belt that dumped toxic mortgage assets into the financial system like a polluter dumping poison into a river,” said Levin. “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.” (more…)