Bair: Regulators clashed ahead of WaMu crash

* Bair confirms squabbling with OTS over WaMu

* Says hamstrung by rules limiting FDIC role

WASHINGTON, April 16 (BestGrowthStock) – 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

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

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

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 (LEHMQ.PK: ) bankruptcy
on Sept. 15, 2008. The OTS placed it in receivership 10 days
later and the FDIC sold it to JPMorgan Chase & Co (JPM.N: ) for
$1.9 billion.

Stock Market Money

(Reporting by Kim Dixon and Dan Margolies; Editing by Andrea
Ricci, [email protected]; +1 202 354-5864; Reuters
Messaging:[email protected])

Bair: Regulators clashed ahead of WaMu crash