Just to cover the ground, just to be sure I've alloted a fair share of the blame for the financial crisis to particularly guilty banks, I give you the case of WaMu (Washington Mutual). Yes, I still feel that early blame and outrage was rightly directed at the Investment banking community, first, and then at the federal government, that this was an appropriate ordering of culpability. But with the opportunity afoot, with the doors of accomodation wide open, the mindless, wrecklessly aggressive example of WaMu's massive attempt to exploit the mortgage market stands out as especially deserving of universal contempt.At WaMu, getting the job done meant lending money to nearly anyone who asked for it — the force behind the bank's meteoric rise and its precipitous collapse this year in the biggest bank failure in American history.
On a financial landscape littered with wreckage, WaMu, a Seattle-based bank that opened branches at a clip worthy of a fast-food chain, stands out as a singularly brazen case of lax lending. By the first half of this year, the value of its bad loans had reached $11.5 billion, nearly tripling from $4.2 billion a year earlier.
--"Saying Yes, WaMu...," NYT (12.29.08)
It's also true that, in September, the federal government quickly and effectively engineered a shotgun wedding between WaMu and acquirer JPMorgan Chase--and a short time later provided $25b of bailout money under the TARP program. And I wish JPMorgan Chase well in managing their way out from under the mess they've accepted. But the WaMu example remains as instructive as it is unbelievable. We need to understand that his kind of management insanity can happen, and did.
This past Sunday's NYT article, "Saying Yes, WaMu Built Empire on Shaky Loans," provides a stunning look into the down-the-rabbit-hole craziness of what passed for business-as-usual at WaMu during that period.
http://www.nytimes.com/2008/12/28/business/28wamu.html?em
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