As the Senate prepares to debate regulatory reform legislation, Sen. Carl Levin is using the failed Washington Mutual as evidence that the bill’s most contentious provisions are necessary.
The chairman of the permanent subcommittee on investigations is prepping four hearings related to the financial crisis, the first of which is scheduled for April 13 and will focus on WaMu’s risky lending practices.
Based on an 18-month investigation, Levin said, he believes that certain provisions of the reform legislation, such as the creation of a consumer protection agency and a requirement that lenders maintain a stake in loans they sell to the secondary market, could have helped avoid, or lessen the impact of, the thrift company’s failure.
“A lot of proposed reforms will gain additional support, we believe, from these findings,” Levin said. “It is my hope that these hearings, these findings, give a boost, a momentum to strong regulatory reform in many, many different ways.”
The now defunct WaMu entered the subprime space about a decade ago when it bought Long Beach Mortgage from subprime magnate Roland Arnall.
The thrift eventually became one of the largest subprime lenders in the nation, funding billions of dollars in A- to D loans, and selling them into securitizations through Wall Street.
The thrift failed in the fall of 2008 and was sold to JPMorgan Chase. Arnall died in early 2008 by which time he had sold most of his subprime holdings.