April 16, 2010 in Business

WaMu problems seen back in ’05

Panel says bank regulator ‘impeded FDIC … efforts’
Drew Desilver Seattle Times
 

SEATTLE – Bank examiners were concerned as far back as 2005 that Washington Mutual was cutting corners and lending imprudently, but agency higher-ups repeatedly blocked attempts to rein in the giant thrift until it was too late.

Examiners from WaMu’s primary federal regulator, the federal Office of Thrift Supervision, repeatedly identified significant problems with the Seattle thrift’s lending practices, loan quality and risk management between 2003 and 2008, a Senate investigative panel found.

“Washington Mutual promised year after year to correct identified problems, but failed to do so,” the panel’s report says. “OTS failed to respond with meaningful enforcement actions, resisted (Federal Deposit Insurance Corp.) recommendations for stronger measures, and even impeded FDIC examination efforts.”

The Senate report parallels one to be formally released today by the inspectors general for the FDIC and the Treasury Department. That report found that the OTS repeatedly deferred to WaMu management, held off on issuing enforcement orders contrary to its established practice, and even relied on WaMu’s own tracking system to monitor the thrift’s compliance with its recommendations.

The FDIC’s own examiners were consistently more critical of WaMu’s operations and compliance actions, but both reports faulted the agency for, in essence, letting the OTS push it around.

Officials from both agencies are scheduled to testify today before the Senate’s Permanent Subcommittee on Investigations. It’s the second of four hearings the panel has scheduled to look into the roots of the financial crisis in risky mortgage lending.

The first hearing, on Tuesday, used WaMu as a case study in how mortgage lenders’ sloppy lending practices, short-term, sales-driven culture and inadequate risk controls combined to inject billions of dollars of dodgy home loans into the financial system

Recent stories in Business
One comment on this story so far. Add yours!

  • liarsinnews on April 16 at 7:31 a.m.

    The Spokesman Review should quit covering up for the local crooks that took part in the scams at WaMu. The only thing I got out the SR was from Doug Floyd who said after the taxpayer stimulus money to Chase to purchase WM, said the employees were in a party mood. My checking account funds evaporated. The VP that looked into it for me, couldn`t even find my account after I presented my bank statement. The account number was lost. Yeah, lost. Crooks.

You must be logged in to post comments.
Please create a profile or log in here.