$700 Billion Bail Out Hammered Out… WaMu Execs Make Out Like Bandits?
They say it all started with housing: low interest rates that were supposed to help more people buy homes. But it wasn’t just low interest rates. It was mortgage brokers and others who saw gaping loopholes in the system and ways to make instant money. Over the weekend I spoke with a Real Estate investor who built condos on the Gulf coast. He told me something I’ve heard whispered at many a cocktail party: mortgage brokers were making upwards of $400K and $500K/year in commissions a year pushing mortgages. (Do you recall, about five years ago, how every other spam email you received was from a mortage broker trying to sell you a new loan or re-fi an existing?) Of course they tried to get everyone “qualified” — that was how they got paid. What a racquet! Stated income loans, no money down loans, 110% equity loans, all around 6% interest rates or lower teaser rates. Everyone with a pulse got a loan regardless of whether they could pay it back or not. Then these shaky, shot-gun loans were “bundled” (whatever that means) and sold as Wall Street “securities” to unsuspecting investors. Us. Now we’ve got to bail out the idiots who conceived this. But wait, they are not idiots: most have MBAs from places like Wharton and Northwestern. And the CEO’s negotiated mega salaries and bonuses and giant severances even if the companies failed! At Washington Mutual, it appears that the departing execs are going to make out like bandits:
“The WaMu executive with the biggest termination package is Stephen Rotella, president and chief operating officer, who is entitled under his current employment agreement to a cash severance of $12.7 million if he is terminated or quits with “good reason.”
Is anyone else as agitated as I am about this? Bad enough when people get stiffed, worse when the “stiffer” flees with millions in tote. Why don’t the shareholders revolt? Where in the bejesus has Barney Frank been, he is chairman of the House Financial Services Committee? His office sent this press release in July… it should have been out three years ago!
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$700 billion to bail out who?
CEO, CFO, COO,?
If the companies broke or banruptcy, how do they have money to pay those leaving package?
I got it. Bail-OutPlan? leaving-company plan. Whatever, the same benefit…… to who? Let’s connect the dots……
TonySo@magnum2000.com
1) WaMu failed. It wasn’t purchased by JPMorgan until after the failure, so I doubt that contract is still a good one or enforceable, but we’ll see how that goes.
2) I get and I agree with the concept of the mortgage brokers sharing a lot of blame in the whole subprime mess. I would also add real estate agents as sharing a portion…they’ll push a home on anyone to get that commission. But what about the folks who signed a paper either (a) not understanding the terms of what they’re agreeing to pay, and/or (b) knowing that they couldn’t afford to take out the mortgage in the first place. I’m a little sick of the careless homeowners not acknowledging their share of the blame.
Good point. And the last time I signed a mortgage, which rivals a tax return in thickness and complexity, there was a paper we signed that said in effect, “we understand what we are getting into.” But here’s my beef: all this would have been a replay of the 1980s when, by the way, many saw actual jail time. We’d have record foreclosures, create another RTC, go on. Who’s bright idea was it to shift this to Wall Street in those complicated swap deals? That’s what brought down the credit markets, I think.
Greg:
Not to put too fine a point on it, but WaMu did not fail. It was seized by OTS and brokered for consideration (though minimal) to JPM so that a failure wouldn’t land on the tax payers hands again.