WASHINGTON — Before Washington Mutual collapsed in the largest bank failure in U.S. history, its executives knowingly created “a mortgage time bomb” by steering borrowers to subprime mortgages and turning the loans into securities the company knew were likely to go bad, one of the most extensive investigations into the causes of the financial crisis has found.
Washington Mutual executives were aware in 2006, at the height of the mortgage boom, of problems at its Southern California-based subprime unit, which the company used to fuel its rapid growth in home lending, according to excerpts of internal e-mails and reports released Monday by the Senate’s Permanent Subcommittee on Investigations after an 18-month probe.
The documents offer a stark and unvarnished view of the warning signs that were ignored as the bank tumbled toward failure.
The company’s chief risk officers called the subprime subsidiary, Long Beach Mortgage Corp., “a real problem for WaMu.”
Stephen Rotella, Washington Mutual’s former chief operating officer, described it as “terrible.”
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