In the two months since federal regulators seized and sold Washington Mutual’s banking operations to JPMorgan Chase & Co., WaMu employees have been resigned to the likelihood that thousands of them would be out of work.
On Monday, they found out just how many: 3,400 employees, out of 4,300 the company had in Seattle at the time of the takeover.
Bowing to aggressive lobbying — along with assurances from banks that the troubled mortgages were OK — regulators delayed action for nearly one year. By the time new rules were released late in 2006, the toughest of the proposed provisions were gone and the meltdown was under way.
“These mortgages have been considered more safe and sound for portfolio lenders than many fixed rate mortgages,” David Schneider, home loan president of Washington Mutual, told federal regulators in early 2006. Two years later, WaMu became the largest bank failure in U.S. history.
In more ordinary times the failure of WaMu would be the business story of the year. Instead it’s basically a tragic footnote, although it’s not a footnote to the 3,400 “lucky duckies,” to borrow a phrase from Atrios.
If the financial sector doesn’t refocus, restructure, and get some priorities straight, there will be many more sad footnotes, and unemployed people.
I just love how the free market “regulates” itself. Boom, bust, big-boom, super-bust. While the people taking risks risk our futures, they get away with millions.
Ugh.
You can’t loan money for people to buy houses when the borrowers can’t pay the loan back.
That’s the first rule of mortgage lending: don’t loan money to people who can’t pay it back.
Myopic vision of the financial industry created this crisis (because investing in sub-prime made sense only if you had a very limited time horizon and were interested in your next bonus) and now myopic thinking will further derail the economy as banks limit lending and slash employment creating a self-fulfilling prophecy of a worsening recession.
Politically Incorrect @ 2
And the second rule of mortgage lending: Republicans will bail out banks and other big investors who loan money to people who can’t pay it back.
Hi Jon,
Actually, Atrios borrowed the term “lucky duckies” from an infamous Wall St. Journal editorial.
3,400 tellers, clerks, and mailroom employees lose their bank jobs? B.F.D. That’s a drop in the local bucket. We’ve got Sound Transit embarking on a massive spending spree next year. It is budgeting to spend over a billion buckeroos in 2009. It’s tax revenue next year will be about $750 million. It will sell about a billion dollars of bonds next year as well. And what happens with all that filthy money? It gets spent priming our pump.
ST & its contractors will be creating good-paying jobs for 40-50 thousand workers in the ’09-’10 two year period. Lots of those will be excellent union jobs. Don’t believe me? Go down to the union hall and ask.
Consumer spending by those hired into the transit services juggernaut of this region will pull us out of the recession, and we’ll leave all but a few pockets of this country in the dust. We’ll kick the asses of the Repug-controlled localities.
NWM–
I agree Public Works projects create high-paying jobs.
The problem comes LATER when We The People are forced to pay back all the loans & cost overruns.
No problem, just raise taxes again & again…right?
Public Works jobs also put huge amounts of Sales Tax dollars into the State & Local Goverment coffers…plus permitting fees etc.
Public Works jobs should be EXEMPT from Sales Tax. This is just one giant Gregoire Shell-game….get local governments to borrow massive amounts of money, build stuff and ship trainloads of Sales Tax dollars to State & Local General Funds to be spent anyway they want.
The problem is using massive debt to essentially finance a transfer of dollars to State & Local General Funds.
This is like sticking your pinky in the dike…and create HUUUUUUUUGE problems down the road.
Short-Term===Jobs & Sales Tax
Long-Term====Massive debt our kids must deal with.
It’s a clever way of Gregoire balancing the Budget though…do it through local government BORROWING!!!
But no problem, right?
Just raise taxes again & again.
Shove the systemic problem on our kids.
How noble of Gregoire and her ilk.
EXEMPT Sales Tax on Public Works Projects which have underlying debt!!!!!!!!
@2:
But that was precisely what the banking industry successfully argued FOR to the regulators in the Bush administration. The mortgage lenders were doing it – so the banks should be able to do it too!
Where were the regulators in the Bush administration? Deliberately sleeping on the job – the warning signals were sounded (read the Times article today) but the regulators ignored them and listened to the banking industry lobbyists.
The lobbyists essentially convinced the reguylators to allow the practices that brought down the banks…reminds me of the auto industry and mileage standards….
The take-home lesson: the Bush administration LET this happen by being in bed with the lobbyists and NOT doing their job regulating the banks and the mortgage lenders.
@10: I want to see cynical complain about the republican governor of california – they have a debt of over 11 billion THIS FISCAL YEAR!
Oh yeah, cynical is too big of a hypocrite to criticize republicans or to realize the Washington state is much better off than other places. Yes – we have a big projected deificit – but if the economy picks up we might not have that big a deficit. In the meantime we will cut spending and use the rainy day fund.
CNR–
News Flash for you!
The phoney-baloney “Rainy Day Fund” is gone too.
Did you miss that??????????????????
Yeah, if we borrow like crazy & build costly Public Works Projects on BORROWED money, the deficit will TEMPORARILY go away…and we will be saddled with huge debt.
CNR–
It is important to look at these Budget Deficits in terms of a Percentage of the Total Budget for perspective.
Washington has the huge advantage of Boeing, Weyerhauser, Microsoft and also had a building boom that fueled the State Economy.
Gregoire had little to do with that.
Yet, thru Gregoire’s overspending even though she publicly stated she knew better, is quite appalling.
Rossi would NOT have approved State Wage & Benefit increases like Gregoire did…nor would he have approved the additional State hiring. And Rossi would have acted much sooner on cost-saving mechanisms in the face of a recession.
I believe had Rossi been elected Governor in 2004, it is safe to say the State wouldn’t be in nearly the pickle we are now.
Gregoire is now pushing for Public Works projects to generate Sales Tax Revenue via massive borrowing. Not a good idea for our kids….only a desperate, short-term fix.
Public Works Projects funded by debt should be EXEMPT from Sales Tax Revenue! That way we can get more bricks/mortar/concrete for OUR tax dollars.
@12/13 Cynical
11 billion over 1 year dwarfs our 5-6 billion over the next 3-4 years. The stats say that state employees make less thatn their counterparts in private industry – significantly (about 15-20%) less. The state also say that this state grew at over 5% and that we were underfunded when Gregoire started – so the “overspending” is mostly in your mind.
the economic downturn that is NATION AND WORLD WIDE has affected this trade dependent state. We just got affected less and later than the other states and our tax system is more likely to have wild swings because it is based on peoples spending (sales tax). The rest of your analysis is bullshit without any data.
cnr–
Analyze & spin it anyway you want…but we need to cut spending NOW.
Roll back Salaries & Benefits.
Layoff 10,000 State Employees
Then see where we stand.
The biggest issue I have is Gregoire increased spending KNOWING it was not sustainable.
How is that responsible??
@15 “we need to cut spending NOW”
“Then see where we stand”
How about we raise taxes on pathetic BIAW goatfuckers who lie endlessly about their phoney investments and multiple homes.
Then see where we stand.
If the powers that be really had a clue about how to fix our economy they would stop taxing the people who do contribute to it and start taxing those who don’t. Where is the sense in that idea and how did it ever become popular in the first place?
So in the wealthiest 1% of our nation there is a percentage that has less invested in our nation than the rest. The ideal 1-percenter will have the vast bulk of his/her worth tied up into private business and stocks/bonds. A certain percentage of 1 percenters obviously fall behind their colleagues however when it comes to investing in America. Do you know how much money is to be earned per year in interest simply by keeping a few hundred million safely tucked away in a savings account, with 0 risk and absolutely nothing being given back to our economy? Well, it happens.
Our government should isolate the stingiest 10 percent of all 1 percenters and hit them with a heavy, heavy tax/fine that would derail any profits they would get simply by having their millions sitting in a bank account. If they don’t pay than the IRS seizes and resells their mansions and yachts to repay their debt to society. The end result of all of this would be the return of capitalistic spirit in this wealthiest and most influential faction of America. The wealthiest would HAVE to invest in our economy and would compete against one another in order to do so, which would create more jobs for Americans along with general economic growth. And any scumbags caught trying to hide their overall worth would be dealt with harshly by our judicial system and serve time in federal prison for the convicted felons they would be.
Only in a perfect world.