During the debate over health care reform, the public was galvanized by the disclosure of outrageous insurance rate increases by Blue Cross.
It was that public outrage that finally got the healthcare legislation passed over Republican opposition.
Now Senate backers of a strong overhaul of the financial system hope that televised hearings on the details of the reckless lending, incompetent management and multiple regulatory failures that sank the nation’s largest savings and loan will fuel support for financial reform in the face of relentless opposition from Wall Street.
The hearings got underway Tuesday in the Senate’s Permanent Subcommittee on Investigations, headed by Sen. Carl Levin,D-Michigan.
In strong contrast to hearings held recently by the congressionally appointed committee to investigate the financial crisis, Levin’s opening hearing was tough, pointed and thorough. Levin said he intended for the hearings to serve as a case study for what happened at financial institutions during the meltdown. He compared WAMU’s selling and packaging of high-risk option ARM and no-doc loans to dumping “pollutants into a river.”
Calling Washington Mutual’s former CEO Kerry Killinger “a forgotten villain of the financial crisis”, Fortune’s Colin Barr sets the stage here. Business Week recounts the testimony here. CSPAN carried the hearings live they can be viewed here.
The star witnesses from WAMU were Killinger and former Chief Operating Officer Stephen Rotella. Killinger testified that WAMU was unfairly targeted by regulators because it not “too clubby to fail” as were larger financial institutions. Killinger insisted WAMU could have worked its way out of the crisis if regulators hadn’t eventually shut it down.
On Friday, we’ll hear from the regulators, who were well aware of WAMU’s questionable lending and securitization but continued to find that the savings and loan was financially sound.