Herein lies the problem for WAMU. It was making this types of loans mostly through its Sub Long Beach Mortgage, when the heat got too hot, they closed it down and tried to right the sinking ship. We know the FHLB's stopped the seizure of WAMU, so they could get their billions out of the bank so it would not be part of the deposits being assumed by JPM. In other words the FDIC did not want to setoff the FHLB Fed Reserve money and therefore be responsible for it. FHLB had to get their money out of JPMC because it would be subject to same provisions as the WMI money was. Meaning when it was withdrawn after the seizure, it would look like a run on JPM. 4 Billion is alot of money to be moved.
WAMU was making "no doc" loans throughout the nation and when they tried to stop loaning to minorities and lower income borrowers, they were reminded of their thrift charter that was all part of the CRA of the Carter Admin. When Pugh resigned in her letter to Killinger, she highlighted this fact.Nothing fueled the S&L crisis more than the CRA and the government mandated provisions of lending. Banks got greedy, including JPM.
WAMU, Indymac, Countrywide, Wachovia, Bank United etc.. Are all part of the redistricting of the FDIC's control through the Federal Reserve, controlled takedowns, Yes! But why? Would it have something to do with no doc liar loans, yep. These banks could not sell their mortgages to Wall Street as of 3rd Q 2007, so they were on the books as liabilities and when the defaults happened, especially from builders, well that was the end. WAMU had a good Cap Ratio, it should never have been seized, but we know how JPM runs the Govt.
When I inquired into Indymac's contractor lending program in 2006. They told me I qualified to get a loan to build 5 homes on my credit with a one year turnaround. As a contractor I could get 100% financing to build 5 Homes !!!! "Without taking one dime out of my pocket!" What was my risk? Bankruptcy if I failed? So!
Think about that for a minute.
There should proabably be at least 1000 prosecutions by now, but no one wants to "open Pandora's box!"
I became attracted to WAMU because of the story, the shareholders (like UMAW) who got wiped out overnight, some had their entire pensions in a well-capitalized bank, the reasons for seizure and sale to JPM for 1% of deposits, was appalling. As time has passed, I have learned WMI was not innocent, but their employees and shareholders were completely screwed by the FDIC and JPM. Yes, WAMU was involved in this type of lending and sale of unsecured mortgages to Wall Street. The thirst for profits, compliance with thrift charter and CDO's on Wall Street was like a cancer, once the players saw the profits that could be made, they fed the monster. Wall Street especially looked to the thrifts tto supply them, because of the CRA requirement and thrift requirements. Eventually the monster collpased from being too overweight and
Now the Monster is camping out at 24 hour fitness getting back into shape. Ready to start his rampage, this time he will keep working out and watching his diet, however his strength is building by the year. You see, the banks knew that once the bubble burst, the survivors would profit from the Foreclosure Process, it's a circle jerk, it just keeps going round and round and Wall Street never changes as long as the government is there to save them.
Hang in there Wamu'ers. SG is on the case, trying to ink out a return or new stock for equity. We have one of the best law firms and local counsel representing us. We are in good hands and if there is a way to get it done, SG has pretty much put their rep on the line here.
Good Friday to You All!
~Don~
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