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Bair's Puzzling WaMu Comments

NEW YORK (TheStreet) -- Federal Deposit Insurance Corp. Chairwoman Sheila Bair made special mention of Washington Mutual (WAMUQ.PK) in her opening statement before the Financial Crisis Inquiry Commission last week, and her comments bear close scrutiny for a couple of reasons.

First, the mention of any company is interesting because regulators in general don't like to mention specific companies. In fact, not mentioning companies when speaking publicly seems to be a special trick of not only regulators, but investors, investment bankers, attorneys -- you name it. They must all take the same PR class. Lesson number one: Speak in generalities. Don't mention companies, dollar amounts -- certainly not people. If no one knows what you're talking about, it's harder to get into trouble.

Indeed, in a 20-page statement, Bair mentions only two other companies -- Fannie Mae(FNM Quote) and Freddie Mac(FRE Quote).
A second reason that Bair's mention of Washington Mutual is interesting is that the FDIC is a co-defendant with JPMorgan Chase(JPM Quote) in a lawsuit filed by WaMu creditors and shareholders, who accuse them of foul play in the seizure and sale of the giant Seattle thrift.

Bair does not mention the lawsuit in her statement before the commission. Instead, she singles out the resolution of Washington Mutual as an exemplary case of regulatory efficiency and good sense.

But what is especially puzzling is the context of the Washington Mutual reference. Bair first talks about what has become a familiar, and overstated point in commentary about the crisis: regulators did not have the tools to deal with large financial institutions that did not accept deposits from you and me.
According to this theory, addressing crises at Citigroup (C Quote) and Wachovia was no problem for regulators, while in cases like Lehman Brothers and AIG(AIG Quote), as Bair puts it (without, of course, mentioning any of these companies by name) "the government was forced to rely on ad hoc measures involving government support to stabilize the situation."


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