Financial Arson Watch
Is Jim Puzzangera of the Los Angeles Times insinuating what I think he’s insinuating ?
Before Washington Mutual collapsed … its executives knowingly created “a mortgage time bomb” by steering borrowers to subprime mortgages and turning the loans into securities the company knew were likely to go bad
“At times, WaMu selected and securitized loans that it had identified as likely to go delinquent” or securitized loans in which the company had discovered fraudulent activity,
Sounds to me as if someone has the sneaking suspicion that people who knew WaMu was headed towards ChapLev did that on purpose so that they could give themselves a little golden parachute by buying CDSs.
Stinking pond scum.
I congratulate Mr Puzzanghera and almost don’t want to mention the fact that his last name is a portmanteau (portfolio ?) of the Italian words for stink and puddle.
After watching the Prince and Rubin testimony three times, not much would surprise me.
i dunno. if they were packaging the loans into securities and reselling them, they wouldn’t be on the books of WAMU anyway.
i would very much doubt that execs could personally directly short any of these things or wamu stock anyway — they were undoubtedly under insider trading restrictions. that’s not to say they couldn’t have shorted say bear stearns.
model that batman
I’ll tell you what surprises me… Remember when there was all that talk about Moral Hazard? Heaven forbid we should do anything to help drowning mortgage borrowers!
After all this time, I’m still waiting for womeone to be held accountable for something. Not just picked on or laughed at or even scorned (I’ve been watching the FCIC hearings, too), but actually held responsible. Of course I’m not suggesting a kangaroo court. But I am surprised that as far as I know, no one is even under threat of prosecution. (If I’m wrong about that, I’d love to know. I’ll check back.)
Since corporations exist to diffuse and disperse responsibility, this is hardly surprising.
Maybe what we need is the reverse of a class-action suit. In a class action, lots of injured parties sue one agent responsible for their injury. Maybe we need a class-agent suit, where one or more injured parties can sue a collection of independent agents whose disparate actions, legal in themselves, link up to create injuriy as a predictable outcome.
Yeah, that would be a short-and-sweet court case. Shouldn’t take more than 10 or 20 years.
The chair of the committee holding WaMu hearings has said that he will wait till his hearings wrap up to decide whether to refer any of the material for criminal prosecution. Whenever I hear something like that done in public, I see it as a call to other interested parties to respond. We see the guy making strong, but cautious, noises. Other parties see it as an announcement that they need to tell him where they stand and how strongly they feel. “How would you help me? How would you hurt me?” is what I hear.
Well, Noni, that last made me smile. My favorite Class Action suit has been ongoing for more than 5 years and dates back to Qwest Communications’ takeover of US West in 2000. In that case, Joseph Nacchio actually went to prison (after a series of appeals that ended last year) for insider trading, but the lawsuit lingers.
I leave the question of legality in this very complex and esoteric field to the lawyers. However, I was raised with a firm grasp of the concept of fiduciary duty, and somewhere along the way that was largely discarded not only in banking but elsewhere in the economy.
And yes, given the glacial timeline of investigations and government, it’s still early days. No doubt there are names we’ve never heard of people who have lost jobs as a result of the roles they played. One question to ask about them, though, is where they will pop up next given that they “did nothing illegal.” The energy traders at Enron, famous for their glee over “screwing Grandma” in California, went on to work somewhere else and I’ve thought about them often in the past 2 years.
WM expanded rapidly by buying up other former S&Ls, including Home Savings, a venerable bank in So Cal, of which I was a shareholder. Certainly the management of WAMU got carried away with growth and growing compensation. I still remember their ads promising they could finance almost anyone. I’ve followed the news and I’ll be interested to see what Carl Levin does. However, while there may be the possibility of criminal prosecution, I see WAMU as more an effect than a cause of the meltdown.
It’s frustrating to know that because of the complexity and the convergence of numerous factors, it’s likely impossible to lay blame at the feet of any particular action, much less a person or identifiable group of persons. The key would seem to be finding a way of preventing a recurrence. I notice that’s going along swimmingly, too.
They certainly couldn’t short WAMU stock, but recall there were no, 0 (zero) reporting requirements for CDSs. I think it possible that insiders thought they could get away with buying CDSs, presumably through an intermediary who was in on the scam. In fact I don’t doubt that some did and have gotten away with it.
What difference does “personally directly” make ? Insider trading restictions only matter if prosecutors can trace assets to their beneficial owners. I’m pretty sure that it was and is impossible to do that for CDSs.
As the housing bubble grew in Orange County, my buddies and I would hang out at the Starbucks on Main St. in Huntington Beach and discuss how far the boom would go over coffee, and when would it be time to sell our houses and get the hell out of California before it collapsed on our heads.
One late summer day in 2004 , WaMu had a crew of models dressed up as cheerleaders with pom-poms and all and were doing cheers for WaMu mortgages for us beach goers.
We decided the time was near.
Next spring the OC Register ran a story about a New Century loan broker that checked into rehab for cocaine abuse. He said he “used” to keep up his breakneck pace canvassing RE agents for loan candidates and approving their loans. (I had visions of the piano player in “Reefer Madness”, pounding on a computer keyboard)
I decided it was time to sell.
So I think we will have to be patient a while and see if they finally get around to investigating New Century.
Glad to make you smile, Linda.
And I am not really kidding about a “class-agent suit,” though how you would do it I can’t venture to say. But over the past decade is was exactly the sort of teamwork of separate agents that made the inflate-and-skim draining of middle class wealth possible. Certainly many of the individual participants and some of the corporate ones were ignorant of their place in the chain of events, but hardly all.