k. To conduct WaMu’s business in compliance with all applicable state and federal laws and regulations.

That is a high standard, and I very much doubt that any organization can reach 100 percent compliance. The rules are too many, they change too often, and there often are many areas within regulation and laws that are less than clear. I’d rather see the establishment of a reasonable compliance program rather than a declaration that one would comply with every conceivable legal standard. No compliance program will achieve perfection. But good ones will circle back when problems are unearthed and make improvements.

You see unsecured depositors, (those over the FDIC limits) are JUNIOR to senior secured bond holders. The FDIC badly wanted to end runs on the nations banks which at the time of the WaMu takover were beginning to happen in earnest.

They move in and take over a company with a positive value just hours before all the other TBTF banks get saved by the Fed and Treasury.

The WaMu boys correctly called the goverments bluff and still lost the hand because the goverment changed the rules in the middle of the game.

By covering all deposits (including HUNDREDS OF MILLIONS deposits above the FDIC limits) while giving senior secured bond holders losses they insured that the entire shadow banking system would crumble. The FDIC honestly didn’t realize at the time that the shadow banking system was actually larger and more imporntant than the commercial banks they regulated.

After the bid for even high quality financial assets vanished the feds looking into the abyss and saw that the dominos simply would not stop falling on their own. It took TARP, TALF, Zero Interest Rate Policy, QE1&2 to reboot the system.

Stuff of legend… I’ll remember 08/09 for 50 years!

* Compensation is excessive. When compensation in some divisions is half of revenues, and bonus-structured on short-term targets, it encourages stupid risk-taking.

* The lending practices generated huge short-term profits, but practically guaranteed that there would eventually be matching losses. How many years of profits were wiped out in the crash?

But has the economy outside of Wall Street truly tanked? Or is it simply the result of retrenchment in the banking/construction/real-estate businesses? That is a pretty big part of the economy, and activity today is a small fraction of where it was at its peak.

What I don’t understand is how the directors and shareholders allowed the system to develop as it did. The board of directors is SUPPOSED to take a long-term view on behalf of the shareholders. Were they truly doing that?

What I hate even more than “criminalizing failure” is socializing the losses made by very well compensated bankers – excessively huge compensation granted to them for their “risk management” skills.

And what I hate even more than THAT is seeing funding for education and other social services cut throughout the country because the economy outside of Wall Street, tanked, thanks to the poor risk management skills of people paid millions to know better, screwing over the budgets of individuals, families and state and federal government alike…

Yes, there is a particularly nasty dog-eat-dog history there as the FDIC believes that WaMu should be one of our poster children of regulatory capture.

WaMu’s primary regulator was the OTS, not the FDIC. The FDIC could only get involved once WaMu was rating was downgraded to a CAMEL 3, 4, or 5. Wholly inconsistent with the gross negligence allegations in the FDIC suit and incredible in retrospect, the OTS was rating WaMu a CAMEL 2 in August 2008, one month before failure.

WaMu, given its size, accounted for approximately 13% of the OTS operating revenues. Although John Reich publicly denied any such capture, other evidence points to WaMu having wagged the OTS dog rather forcefully.

When the financial crisis started, the OTS apparently stonewalled the FDIC when it started raising alarms about WaMu’s condition. The OTS stonewalled by not downgrading WaMu’s CAMEL rating below a 2 and thereby effectively kept the FDIC at bay.

And the FDIC is the one now baying at what is left of the dead dog. And indirectly baying at the soon-defunct OTS as well.

How can a regulator be effective when their boss doesn’t let them?

Did you read the Japan article? Japan doesn’t want the money, and you get more bang for your buck if the charity isn’t “locked in” to using your money on one specific country. What’s heartless about wanting the money to go to a place where it is needed?

They are creating a tort from negligence.

Their behavior is exactly the same as a doctor who leaves a sponge in a patient, only the money amounts are larger.

Also being Refuted:

1. They didn’t know or understand the risk.
2. The Standards weren’t lowered as the risk increased.
3. The Executives wouldn’t bet against themselves ( Ignoring the money they were salting away )

& this is just a partial list.