Another example of where government regulations were in place and the government failed the people. Obama's answer is that we need more laws.
The last time I checked banks were still failing at a record pace.

=====================================

http://finance.yahoo.com/news/Senators-blast-regulators-for-apf- 3562129313.html?x=0&sec=topStories&pos=8&asset=&ccode=

Senators blast regulators for ignoring WaMu risks

WASHINGTON (AP) -- Arguing that bank regulators played a crucial role in creating the conditions for financial crisis, a Senate panel Friday
blasted officials for lax oversight, infighting and inaction before the largest bank failure in U.S. history.

Lawmakers on the Permanent Subcommittee on Investigations directed
withering criticism at officials from the Office of Thrift Supervision,
the main regulator of Washington Mutual Inc. They demanded to know why
OTS leaders gave executives at WaMu years to correct glaring problems.

The executives never addressed regulators' concerns about risky lending
and weak management, but the regulators took no formal action until the
global financial crisis already was taking shape, documents show.

"It is not only feeble enforcement, it is pitiful enforcement," said
panel chair Sen. Carl Levin.

OTS "was more of a spectator on the sidelines, a watchdog with no bite,
noting problems and making recommendations, but not trying to correct
the flaws and failures it saw," Levin said.

Levin charged that OTS officials handled WaMu with kid gloves because
the agency relied for its budget on fees collected from banks. Fees from
WaMu made up about 15 percent of OTS' budget -- more than any other
bank's.

The Michigan Democrat pointed an e-mail in which then-OTS chief John
Reich called WaMu CEO Kerry Killenger "my largest constituent
assetwise." He said that and other e-mails showed the agency's
submissive attitude toward the banks it was supposed to regulate.

Reich replied that he picked up the word "constituent" while working on Capitol Hill, and said it did not "reflect any sort of sinister or inappropriate relationship."

"I am by nature a humble person, I am a casual person and an informal
person," Reich said. "It is not at all unusual that I address people ...
by their first name, particularly if I am 10 years older than they are."

Reich ran the OTS during the mortgage boom and the bust that destroyed
several large companies it oversaw -- including IndyMac, American International Group Inc., WaMu and Countrywide Financial Corp. Companies regulated by OTS must keep at least 65 percent of their assets in
mortgages and other consumer loans.

Fueled by the housing boom, Washington Mutual's sales to investors of
subprime mortgage securities leapt from $2.5 billion in 2000 to $29
billion in 2006. The 119-year-old thrift, with $307 billion in assets,
was sold for $1.9 billion to JPMorgan in a deal brokered by the FDIC.

The OTS is slated for elimination under a proposed overhaul of financial regulation being championed by the Obama administration. That overhaul
saw a major setback Friday as all 41 Senate Republicans signed a letter opposing the bill.

There has been wide bipartisan agreement about eliminating OTS, which
has become a symbol of regulators' incompetence since revelations that
it wooed banks by offering them easier examinations and less red tape.

But some observers said the hearing still gave some answers about how
failures like WaMu's might be prevented in the future.

"We see it as part of a push not only to pass the reform legislation in
as tough a form as Democrats can get, but also to rewrite a lot of the
rules under current law," Karen Shaw Petrou, an analyst with the
consulting firm Federal Financial Analytics, wrote in a note to clients.
She said the hearing exposed critiques of capital requirements and
banks' practice of choosing the least-tough regulator.

Treasury Department inspector general Eric Thorson told the panel that
the problems at WaMu and with the OTS were not unique. He said other regulators had demonstrated the same reluctance to act at other banks he
had investigated.

In a joint report with the inspector general of the Federal Deposit
Insurance Corp., Thorson wrote that OTS and FDIC officials spent weeks sparring with each other over WaMu as the credit markets seized up in
2008.

The FDIC has backup oversight of WaMu. Chairman Sheila Bair testified
that her agency could not do anything about the bank's risky position
because an earlier agreement blocked it from examining banks that were financially healthy.

The OTS refused for months to heed the FDIC's call that it downgrade
WaMu so that the FDIC could take a more active role.

FDIC inspector general Jon Rymer disputed that, telling the panel, "FDIC
could have taken enforcement action to remedy or prevent unsafe or
unsound practices" given OTS reluctance to force changes.

WaMu engaged in increasingly risky lending starting in 2002. The bank originated some of the highest-risk mortgages -- those that allow
borrowers to pay so little their debt level actually increases over
time.

It also bought loans from outside mortgage brokers, often without
ensuring the loan applications were complete and accurate, bank
examiners found.

The mortgages had high rates of default but WaMu nevertheless packaged
them into investments and resold them through the financial system.

"Together, WaMu and (its mortgage lender) Long Beach dumped hundreds of billions of dollars of toxic mortgages into the financial system like polluters dumping poison in a river," Levin said.

Senate panel blasts regulators for 'feeble oversight of failed bank
Washington Mutual

CMPQwk 1.42-21 9999
Democrats -- The party of trickle-up poverty ....

--- PCBoard (R) v15.3/M 10
* Origin: (1:226/600)