Regulators failed to supervise Washington Mutual: report

NEW YORK Mon Apr 12, 2010 8:31am EDT

Customers leave a bank branch at the Washington Mutual headquarters in downtown Seattle, Washington September 26, 2008, a day after federal regulators seized the company and sold its branches, deposits and loans to JPMorgan Chase in the largest bank failure in U.S. history. REUTERS/Robert Sorbo

Customers leave a bank branch at the Washington Mutual headquarters in downtown Seattle, Washington September 26, 2008, a day after federal regulators seized the company and sold its branches, deposits and loans to JPMorgan Chase in the largest bank failure in U.S. history.

Credit: Reuters/Robert Sorbo

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NEW YORK (Reuters) - U.S. regulators did not properly supervise Washington Mutual Inc, even as the savings and loan began to crumble because of the subprime mortgage crisis, a federal investigation concluded, the New York Times reported.

Seattle-based Washington Mutual became the biggest bank failure in history when it filed for bankruptcy in September 2008 at the height of the global financial crisis. Regulators then seized the operation before selling it to JPMorgan Chase & Co for $1.9 billion.

The Times reported the investigative report found that two agencies overseeing Washington Mutual "feuded so much that they could not even agree to deem the company 'unsafe and unsound' until September 18, 2008" -- when it was too late to save the bank.

The Times said it obtained a draft of a report prepared by the inspectors general for the U.S. Treasury Department and the Federal Deposit Insurance Corporation. The report is expected to be released on Friday, coinciding with hearings this week by the Senate Subcommittee on investigations into Washington Mutual.

The key factor in Washington Mutual's failure was "management's pursuit of a high-risk lending strategy that included liberal underwriting standards and inadequate risk controls," the report said, according to The Times.

(Reporting by Steve Eder; Editing by Derek Caney)

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Comments (6)
joepoppa wrote:
I would suspect these regulators still have their jobs or, at least, still have jobs elsewhere in government. Chester A. Arthur thought he was doing a good thing, creating the civil service system, but it needs to be highly modified. No one ever gets fired, making it a primary reason our goveerment is so screwed up. No one cares about adequate job performance because there are no consequences. These people get paid more than the private sector and get a full pension after only 20 years service. If they entered public service, then, right out of college, they would be eligble for pension at the age of 42. This is one of several reasons our country is going bankrupt. It has been much too generous for several decades, something that is unsustainable.

Apr 12, 2010 9:04am EDT  --  Report as abuse
King2003 wrote:
This is one side of the story… The other story says… “WAMU was a solvent bank at the time of seizure… It was not seized.. it was robbed… during broad daylight”

If you guys would like to know the truth, then follow the link http://www.wamustory.com/

Apr 12, 2010 10:27am EDT  --  Report as abuse
deborathompso wrote:
The Democratically controlled Congress intentionally caused the mortgage crisis for the exact reason were now seeing happen. They wanted an accuse to take over the banks. Just like the car companies, health care, student loans. This is Facism plane and simple.

Apr 12, 2010 10:46am EDT  --  Report as abuse
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