First and foremost, the Seattle Times has a fascinating two parter, that you must not miss: A series of interviews with former WaMu executives and employees, as well as a survey of internal company documents, reveals that management plotted a “reckless course that doomed the bank.”
I always find it instructive to note the people who try to shift blame elsewhere, when it disagrees with their prior world view. Regarding WAMU, the facts are rather damning:
• In its headlong pursuit of growth, WaMu systematically dismantled or weakened the internal controls meant to prevent the bank from taking on too much risk — the very standards and practices that had helped it grow in the first place.
• WaMu’s riskiest loans raked in money from high fees, but because the bank skimped on making sure borrowers could repay them, they eventually failed at disastrously high rates. As loans went bad, they sucked massive amounts of cash that WaMu needed to stay in business.
• WaMu’s subprime home loans failed at the highest rates in nation. Foreclosure rates for subprime loans made from 2005 to 2007 — the peak of the boom — were calamitous. In the 10 hardest-hit cities, more than a third of WaMu subprime loans went into foreclosure.
By the summer of 2004, nearly 60 percent of the loans WaMu was making were the riskiest sort — option ARMs, subprime mortgages and home-equity loans.”
Both parts of the series are well worth your time . . .
Reckless strategies doomed WaMu (Part one)
Execs say WaMu fell victim to the economy &emp; but WaMu caused its demise by embracing risky loans and dismantling safeguards.
Seattle Times, October 25, 2009 at 12:10 AM
WaMu: Hometown bank turned predatory (Part two)
Seattle Times, October 26, 2009