WaMu 'Poisoned' Financial System: Senate Report

Senate panel says lender knowingly built 'mortgage time bomb'
By Kevin Spak,  Newser Staff
Posted Apr 13, 2010 10:15 AM CDT
Washington Mutual's former general auditor, Randy Melby, confers with its former chief risk officer James Vanasek, before testifying before the Senate's subcommittee on Investigations.   (AP Photo/Cliff Owen)
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(Newser) – Washington Mutual made subprime loans it knew would go bad, then packaged them into risky securities, creating a “mortgage time bomb,” according to a Senate report. The permanent investigations subcommittee is grilling former WaMu execs this morning. The report also says the bank packaged and sold loans it knew were tainted by fraud, without disclosing the fraud to buyers, the Los Angeles Times reports. WaMu even pushed some buyers who qualified for prime loans into subprime ones.

“Washington Mutual built a conveyor belt that dumped toxic mortgage assets into the financial system like a polluter dumping poison into a river,” says committee chair Carl Levin. But Washington Mutual’s former CEO will argue that regulators were “unfair” when they forced the company to sell itself to JPMorgan rather than bail it out, the Wall Street Journal reveals. The Journal tried to obtain documents related to that decision, but entire pages were redacted.

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