WaMu CEO Defends Bank At Senate Hearing
MICHELE NORRIS, Host:
From NPR News, this is ALL THINGS CONSIDERED. I'm Michele Norris.
ROBERT SIEGEL, Host:
NPR's Jim Zarroli reports.
JIM ZARROLI: Washington Mutual was a stodgy century-old thrift company that suddenly became a powerful player in the lucrative subprime mortgage business. Employees were pressured to sell as many of the loans as possible, loans that were repackaged as securities and sold to investors. And Michigan Senator Carl Levin says employees quickly learned to cut corners.
CARL LEVIN: Because volume and speed were king, loan quality fell by the wayside, and WaMu churned out more and more loans that were high risk and poor quality.
ZARROLI: Levin chairs the Senate Permanent Subcommittee on Investigations, which is looking into WaMu's failure. Today, the subcommittee heard from some former top officials of the bank. Chief Risk Officer James Vanasek noted that WaMu gave bonuses to employees who sold a lot of mortgages regardless of whether the borrowers could afford them.
JAMES VANASEK: It was inevitable that certain people would coach borrowers to meet the minimums. They gamed the system from time to time. But as I indicated in my earlier statement, it was extremely hard to catch.
ZARROLI: And meanwhile, WaMu kept packaging its mortgages and selling them to investors. Senator Levin asked former WaMu official David Beck whether he knew about the level of fraud in the company's loans.
DAVID BECK: I understood that there was fraud and I understood that there were...
LEVIN: Shouldn't you have checked to make sure that the fraudulent, tainted mortgages were not part of those securities before you peddled them? Isn't that part of your job?
ZARROLI: Still, chief executive Kerry Killinger insisted today that WaMu could have survived if federal regulators hadn't stepped in.
KERRY KILLINGER: Washington Mutual should not have been seized and sold for a bargained price, but should have been allowed to work its way through the financial crisis.
ZARROLI: Jim Zarroli, NPR News.
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