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Feds should look for fraud source

January 7, 2009
The Daily Mining Gazette

Too many of those who engineered the avalanche-like collapse in the "subprime" mortgage markets have walked away from their misdeeds as rich men and women. If federal authorities are not looking into the possibilities that fraud was committed, they should be doing so.

Among the financial institutions that collapsed as a result of idiotic lending practices was Washington Mutual Bank. It went down earlier this year after it was revealed that its portfolio of loans with little expectation of being paid off had reached $11.5 billion. "WaMu" was sold to JPMorgan for $1.9 billion. At one time the company had been valued at $40 billion. Investors lost billions of dollars.

Former WaMu employees have admitted that they were driven to approve loans regardless of borrowers' ability to repay the money. In one case, a loan officer was told by an applicant that he had a six-figure income as a mariachi singer. The only proof of his income offer was a picture of the man in a mariachi outfit. The loan was approved.

Former shareholders of the company have filed a class-action lawsuit.

Kerry K. Killinger, who served as WaMu chief executive for several years, collected an estimated $100 million from the company - for running it into the ground.

Federal investigators should probe whether executives such as Killinger simply made mistakes - or knew precisely what they were doing.



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