Thursday, April 15, 2010

WaMu Examiner Ridiculed, Called "Housing 'bubble' boy"

by Bill McBride on 4/15/2010 06:30:00 PM

From Jim Puzzanghera at the LA Times: Regulators did little to halt reckless practices at WaMu

Federal banking examiners found serious problems at Washington Mutual Bank at least five years before its 2008 collapse, but their supervisors showed little concern ... During those five years, examiners constantly warned of "less than satisfactory" loan underwriting, the "horrible performance" of its subprime-backed mortgage securities and the failure of WaMu executives and federal regulatory supervisors to do much about it.

One examiner said he was derided by colleagues as "the housing 'bubble' boy" for his "gloom and doom" predictions for some risky loans, and another complained that critics of subprime loans were called "chicken little."
...
Former OTS Director John Reich, who served from 2005 to 2009, referred to WaMu Chief Executive Kerry Killinger as "my largest constituent" in a 2007 e-mail.

That attitude pervaded the upper levels of the agency ...
Once again the field examiners did their job, but their efforts were ridiculed. I was asked by a reporter a couple of years ago who was to blame for the housing bubble, and I said the list is long, but it starts with the regulators ...

Cutting Red Tape This photo from 2003 shows two regulators: John Reich (then Vice Chairman of the FDIC and later at the OTS) and James Gilleran of the Office of Thrift Supervision (with the chainsaw) and representatives of three banker trade associations: James McLaughlin of the American Bankers Association, Harry Doherty of America's Community Bankers, and Ken Guenther of the Independent Community Bankers of America.

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