ALEX COHEN, host:
From NPR News, this is Day to Day. As we've been reporting throughout the program, Congress continues to debate the $700 billion rescue package for Wall Street and then late yesterday news that Washington Mutual became the latest bank to fail. This is also the largest bank failure in U.S. history. Washington Mutual was sold to JPMorgan Chase. Here with more is Marketplace's Nancy Marshall Genzer, and Nancy, how much did JPMorgan Chase pay for Washington Mutual?
NANCY MARSHALL GENZER: Almost $2 billion, and it happened really fast. U.S. regulators seized the bank, then they turned right around and sold almost all of it to JPMorgan. JPMorgan was told to take control of all of Washington Mutual's deposits and bank branches today.
COHEN: So many bank failures of late. Weren't there rules put in place during the S&L crisis of the 1980s designed to prevent bank failures?
GENZER: Well, funny you should ask. Yes. Actually they were designed specifically for the subprime situation. The rules said banks had to do their homework. They had to make mortgage applicants fill out their paperwork, they had to prove that they had enough income to actually pay back the loans, this all sounds familiar, doesn't it? But I'm talking about the 1980s. I had a very interesting conversation about this today with William Black. He's now a professor of economics and law at the University of Missouri, but he was the government's chief litigator during the S&L crisis in the '80s. He says there was nothing wrong with the rules put in place in the '80s, they just haven't been enforced.
Professor WILLIAM BLACK (University of Missouri): You can have all the rules in place. But if you have far too few regulators or if the regulators don't believe in regulating, the rules of course will be completely ineffective.
GENZER: And of course, Washington Mutual took advantage of the lack of regulation to dive into sub-prime loans. It made billions of dollars worth of subprime and adjustable rate mortgages to unqualified borrowers.
COHEN: Might there be any connection between this failure of Washington Mutual and the deals afoot right now with the Bush administration bailout plan? Do you have any sense that Washington Mutual customers are going to call Members of Congress?
GENZER: Right, and if there is- well, if Fannie Mae and Freddie Mac were so remote but Washington Mutual, maybe there's a branch right in their neighborhood and they take more notice. That's actually not the case and it's because consumers didn't lose any money. JPMorgan now owns Washington Mutual. Depositors have full access to their money. So Princeton economist Peter Kenen told me there's absolutely no reason for people to call Congress now.
Dr. PETER KENEN (Professor of Economics, Princeton University): They're not suffering losses and therefore I don't think you're going to get a lot outrage from the public. There's not occasion for somebody to call your Congressman and say, do something, I just lost $6.
GENZER: And Kenen says some members of Congress may say, well, this worked out so well, there's no need for a federal bailout.
COHEN: Nancy Marshall Genzer of public radio's daily business show, Marketplace. Thanks, Nancy.
GENZER: Thank you.
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