R.C. Lim, Attorney and Counselor at Law

The LA Times Picking Over Carrion: WaMu’s Role in the “Mortgage Time Bomb” Revealed!

Since the mortgage crisis has begun, I find that I often read newspapers and get the distinct impression that still no one gets what has happened here with our mortgage mess.

Today’s Los Angeles Times leads with a story uncovering Washington Mutual’s role in the housing crisis. Here the main piece of news is that the bank continued to accept loans in which it had uncovered fraudulent activity because the bank knew it would simply package the debt and sell it off to some other party.

The issue here is that this was commonplace among all of the banks in all of the various lending markets and had been so for years! Moreover, this is not a very well kept secret. Talk to any honest real estate appraiser, and he or she will tell you about the mountains of business that didn’t come his or her way because of scruples. Talk to anyone who packaged the debt, and he or she will tell you about the bag of tricks that were then used to gain higher ratings from the credit agencies.

Washington Mutual makes a convenient scapegoat because it no longer exists as an independent bank. Washington Mutual collapsed and was seized by regulators and then in turn sold to Chase. When the LA Times runs a story about how nearly all of the still existing banks were basically in the same line of work, that’ll be news! Basically, the inference that I draw from WaMu’s collapse is that the bank was less involved in the “mortgage time bomb” than the banks that are still around since it means that they did a worse job at getting the toxic stuff off of the books.

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