The chairman of the Federal Deposit Insurance Corp on Friday said that for years before Washington Mutual became the biggest bank bust in U.S. history, the agency was prevented from examining the bank by a rival regulator.
The remarks by FDIC chairman Sheila Bair painted a picture that backed up a report released on Thursday by a Senate subcommittee on investigations that concluded that as WaMu careened toward collapse, regulators squabbled.
The panel is examining the causes of the 2008 financial crisis and using Washington Mutual as a case study. Several former and current regulators testified before the committee on Friday.
The Office of Thrift Supervision, the thrift's primary regulator, insisted on giving the thrift a higher quality rating than the FDIC, which insured its deposits and was its backup regulator, according to the report. Bair echoed those findings.
In one case, OTS indicated that should FDIC want to review asset quality, FDIC could review OTS workpapers only, Bair told the Senate panel in written testimony.
For years, OTS failed to provide the FDIC with access to key records, and work space at Washington Mutual, she said.
In 2007, the FDIC argued unsuccessfully that we needed to review the loans for compliance, Bair said.
The OTS in 2008 told the FDIC that its number of examiners at WaMu was excessive, even as FDIC employees were barred from reviewing loan files there.
Bair wants interagency rules changed to give FDIC more power to take actions when it sees red flags at thrifts like WaMu.
The OTS eventually agreed with the FDIC's lower rating for Washington Mutual, but by then the nation's biggest savings and loan was just days from collapse.
Depositors withdrew $17 billion from Washington Mutual following Lehman Brothers Holdings Inc's
(Reporting by Kim Dixon and Dan Margolies; Editing by Andrea Ricci)