The bankrupt holding company for Washington Mutual has sued the Federal Deposit Insurance Corp., alleging the agency has improperly denied potentially billions of dollars in claims against WaMu’s former banking unit.
The suit, filed late Friday in federal district court in Washington, D.C., also claims the FDIC improperly sold WaMu’s banking assets to JPMorgan Chase for $1.9 billion, rather than conducting a “straight liquidation” that could have produced more money for creditors — including the holding company.
According to these accounts, pressure to keep lending emanated from the top, where executives profited from the swift expansion – not least, Kerry Killinger, who was WaMu’s chief executive from 1990 until he was forced out in September.
Between 2001 and 2007, Killinger received compensation of $88 million, according to the Corporate Library, a research firm. He declined to respond to a list of questions, and his spokesman said he was unavailable for an interview.
During Killinger’s tenure, WaMu pressed sales agents to pump out loans while disregarding borrowers’ incomes and assets, according to former employees. The bank set up what insiders described as a system of dubious legality that enabled real estate agents to collect fees of more than $10,000 for bringing in borrowers, sometimes making the agents more beholden to WaMu than they were to their clients.
WaMu gave mortgage brokers handsome commissions for selling the riskiest loans, which carried higher fees, bolstering profits and ultimately the compensation of the bank’s executives. WaMu pressed appraisers to provide inflated property values that made loans appear less risky, enabling Wall Street to bundle them more easily for sale to investors.
Earth to Congress, come in Congress. You got a bunch of regular people turning blue out here.
While it’s great fun to grandstand over AIG, and lord knows AIG has deservedly been a flash point, this is pretty nuts, too. The Banksters are now going after the surviving New Deal financial regulations. I honestly don’t know how much more the American public will take.
As Barry Ritholtz writes:
At what point do you just liquidate every last one of these sons of bitches — and throw their management in jail?
Everyone has the right to due process, of course. While conservatives spent decades disparaging “trial lawyers,” the corporate world is full of them and they are just fine with going to court. But justice requires that bad actors be held accountable, no matter their class or philosophy.
Justice often happens when people are charged with some kind of crime, to put it simply. So far only the most obvious individual Ponzi scheme offenders are being dealt with. The institutional corruption endemic to corporate America has received a complete pass.
The Obama administration and Congress have now been issued an historic challenge: either let the Banksters try to destroy the FDIC’s authority, or stand up on behalf of the American people. Obama has been pretty cautious to this point, but this would seem to force the issue. Either we have a government of, by and for the people, or we don’t. It’s really that simple.