Floyd Norris, writing about the trial of Kerry Killinger and other WaMu executives doesn’t come out and say that the Crash of 2008 was the result of a mad game of musical chairs, but that’s what his column led us to conclude. The pursuit of short-term gains appears to have hidden long-term consequences in plain sight.

What went wrong? The chief executive, Kerry K. Killinger, talked about a bubble but was also convinced that Wall Street would reward the bank for taking on more risk. He kept on doing so, amassing what proved to be an almost unbelievably bad book of mortgage loans. Nothing was done about the office where fraud seemed rampant

The regulators “on the ground” saw problems, as James G. Vanasek, the bank’s former chief risk officer, told me, but the ones in Washington saw their job as protecting a “client” and took no effective action. The bank promised change, but did not deliver. It installed programs to spot fraud, and then failed to use them. The board told management to fix problems but never followed up.

Drop me a line at rjk@dailyblague.com
This entry was posted on Friday, March 25th, 2011 at 8:00 pm.