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Wall Street Journal:"Details Still Scarce on WaMu Failure"

http://online.wsj.com/article/SB10001424052702304506904575180441067747062.html?mod=WSJ_hpp_sections_news

APRIL 13, 2010

BY DAN FITZPATRICK AND JOHN D. MCKINNON

More than 18 months after the largest bank failure in U.S. history, federal regulators have disclosed few details about their handling of Washington Mutual Inc.'s collapse, including the decision to let J.P. Morgan Chase & Co. buy the doomed financial institution at a bargain price.

Washington Mutual has largely faded from the headlines as the U.S. banking industry gets back on its feet, helped by massive infusions of taxpayer-funded capital and intervention in the financial markets. But the decision-making process by regulators as the thrift teetered remains a mystery, showing the continued reluctance of government officials to release details about some of the biggest crashes of the financial crisis.

At a Senate subcommittee hearing Tuesday, former Washington Mutual Chief Executive Kerry Killinger is expected to denounce the failure as "unnecessary" and "unfair," partly because the thrift was shut out of "hundreds" of meetings and phone calls with financial-industry executives that determined the "winners and losers" in the crisis, according to a person familiar with his prepared remarks.

The Senate panel is making Washington Mutual a case study of the problems that paralyzed U.S. financial markets. Sen. Levin said investigators gathered evidence that suggests company officials continued securitizing large volumes of risky and fraudulent loans despite repeated warning signs. Mr. Killinger and former Washington Mutual President Stephen Rotella are expected to reject the charge they ramped up risky lending as the crisis worsened and testify the company reduced its volume of high-risk lending between 2005 and 2007.

A second hearing by the subcommittee Friday will focus on the regulatory response to Washington Mutual's problems. Ms. Bair is scheduled to testify.

Federal officials have been under pressure from lawmakers to make public more detailed information about the government's handling of the crisis. In late March, the Federal Reserve Bank of New York disclosed dozens of troubled mortgage assets it got as part of the 2008 rescues of Bear Stearns Cos. and American International Group Inc.

When the Office of Thrift Supervision seized Washington Mutual, it said the thrift was "likely to be unable to pay its obligations" and had "no realistic chances for raising new capital." The thrift's deposits had declined by $22 billion in the previous two months, the federal agency said, and losses were ballooning because of Washington Mutual's exposure to tumbling real-estate prices and risky mortgages. An OTS spokesman declined to comment.