The Washington Mutual Collapse Highlighted the Foreclosure Crisis
The historical collapse of the biggest bank in USA, Washington Mutual, highlighted the drama of the foreclosure crisis.
After the federal takeover of Washington Mutual in September 2008 the previous staff continued to arrive for work for many days – drifting around and twiddling their fingers till the close of January 2009 when they were finally given the exit note. Iriz Glaze one of the employees who had been slogging for decades giving her heart and soul into a company that had been like a family to her, suddenly found herself not dreaming about retiring on a rocking chair but hunting for another job in her late 50’s. In the gloom of recession it was an impossible task. She bemoaned, “When you are with one company for 18 years, you get to know everybody and everything. I loved my job, just absolutely loved it. You don’t realize that so much of your self-esteem, so much of your being, is wrapped up in what you do.”
James Meacham was in the centre of some of the most dubitable mortgage loans of Washington Mutual. With a top degree in theology he had for sometime been a minister. In 2000 he joined Washington Mutual in Seattle and came to be the vice president of Mortgage division of WaMu at Long Beach, California. The division focused on sub-prime mortgages that were granted to those with weak credit histories.
Speaking frankly Meacham said that the packaging of loans and the slicing and selling of these to investors did not make any sense. But there was the allure of hefty profits for all concerned and the appetite of the investment banks for these seemed to have no end. He commented, “There are times that I think that I should have spoken up more when things didn’t seem right to me. On the other hand, I’m not sure it would have helped any.”
His superiors put pressure on him to rapidly increase the flow of business. Formulas and monetary projections showed that the packaging and slicing of these exotic mortgages would be excellent without flaws. There was a general feeling that the game rules had changed. Meacham explained, “The basic problem was the assumption that housing prices would always go up. It was an egregious error.”
Meacham is now in his mid forties. He was one of the many executive laid off towards the close of 2005. It was these sub-prime loans that turned out to be sheer poison.
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