Tuesday, August 9, 2011
No criminal charges against WaMu: 'Revolution, anyone?'
It was the biggest bank failure in U.S. history, and the announcement by the U.S. Attorney's office in Seattle that no criminal charges will be filed against former executives of Washington Mutual generated a good head of righteous steam over the weekend.
"This is an outrage! Revolution, anyone?" one commentator wrote the Seattle Times, while another complained: "So the regular Joe makes a mistake and gets his hand cut off, but if the big kingsmen make a mistake, nothing happens."
A brief statement by U.S. Atty. Jenny A. Durkan's office Friday said that a federal task force looking into the September 2008 failure, which followed years of high-risk loans in the midst of the nation's increasingly tenuous housing bubble, found no evidence of prosecutable criminal wrongdoing -- however dubious the management seemed to the thousands of investors who lost their shirts.
"Investigators have conducted an extensive investigation that included hundreds of interviews and the review of millions of documents relating to the operations, and the subsequent failure, of Washington Mutual Bank," the Justice Department statement said. "Based upon its investigation, the Department of Justice has concluded that the evidence does not meet the exacting standards for criminal charges in connection with the bank’s failure."
The department is cooperating with the Federal Depositors Insurance Corp. in a lawsuit against three former executives of the bank alleging gross negligence and breach of fiduciary duty, the statement said.
Those would be the executives who were still earning millions of dollars as the bank plummeted toward insolvency, issuing risky subprime mortgages, often based, according to the bank's own internal audits, on fraudulent documents. Former WaMu chairman Kerry Killinger earned $65.9 million in compensation during the nearly four years before the bank's failure, the FDIC said in its suit, which targets Killinger and two other former WaMu executives, former president Stephen J. Rotella and ex-loan executive David Schneider. The top managers have strongly denied any wrongdoing.
The Seattle Times in an editorial earlier this year already made it clear there was little sympathy for the executives' protests that the bank had been well-managed: "When Rotella ... answers a federal lawsuit by calling himself 'an effective, hardworking bank manager,' and Killinger, the former CEO, answers the same lawsuit by saying he 'responsibly and consistently served the interests of its depositors, customers and shareholders,' our sympathy shrivels to the size of a raisin," the editorial board said.
Over the weekend, there were similar protests. "The bottom line: Large-scale white collar crime goes unpunished in America, except for out-and-out Ponzi schemes," Seattle PI.com columnist Joel Connelly proclaimed.
"Who, I ask, has gone to jail among those who issued reckless and fraudulent loans that triggered the housing crisis?" he said. "I can't help but wonder whether the failure to go after architects of this bank failure is itself rooted in a fear of failure."