—U.S. Representative Rick Larsen (WA-02) released the following statement about this week’s Senate hearings on the failure of Washington Mutual. Larsen points to the hearings as a strong case for the need to protect consumers and enact Wall Street reforms. A report to be released Friday by the inspectors general of the Treasury Department and the FDIC found that WaMu’s two federal regulators, the FDIC and the Office of Thrift Supervision, could not agree on how to regulate the bank and who should be the primary regulator. As a result neither regulator took action to stop WaMu’s risky behavior until days before the bank failed.
“This week’s hearings paint a picture of a bank that sold risky mortgages to unsuspecting homeowners in order to rake in huge profits. Federal regulators turned a blind eye to these risky practices and allowed Washington Mutual to gamble with our future. “This reckless behavior at the expense of consumers helped bring about the greatest financial crisis of our time. It was the largest bank failure in U.S. history and resulted in thousands of job losses in Northwest Washington.
“Federal regulators were asleep at the switch while WaMu made tens of thousands of risky loans. Consumers suffered as big banks put the interests of big profits and big bonuses ahead of working families.
“The WaMu hearings and the inspectors general report provide a sobering reminder of the urgent need for financial regulatory reform. We must prevent a crisis like this from happening again by imposing strong oversight of financial firms like WaMu and protecting American consumers from unfair and abusive financial products like WaMu’s risky mortgages.
“I urge the Senate to act quickly and pass financial regulatory reform so that financial firms like WaMu will no longer be allowed to drive American families and our country’s economy off a cliff in the future.
Larsen voted for the House financial regulatory reform bill that would prevent a situation like WaMu from happening again. The House bill would:
Consolidate federal banking and thrift regulators: WaMu’s risky actions were never stopped by federal regulators because its two regulators could never agree on who was doing the regulating. This will help ensure that financial firms like WaMu are subject to strong oversight by a single federal regulator.
Curb abusive lending practices: The House bill protects consumers from financial abuse by creating a new, independent federal agency solely devoted to protecting Americans from unfair and abusive financial products and services. A Consumer Financial Protection Agency could have the authority to ban the risky loans WaMu sold to unwitting homeowners – loans that are still legal today despite the damage they did to the economy and the lives of many Americans.
