Thursday, January 15, 2009

Coffee Is for Closers ... at WaMu

JPMorgan Chase released its fourth quarter results today. It squeaked by with a tiny profit, but warned that its purchase of Washington Mutual is going to cause the bank some wretchedness this year. The New York Times reported that WaMu loan losses could reach as high as $36 billion, $3.5 billion more than what JPMorgan had accounted for.

Want to know wretched? Read about the boiler room run by the lending offices at WaMu, as profiled by the NYT's Peter Goodman and Gretchen Morgenson in their Dec. 28 article, "Saying Yes, WaMu Built Empire on Shaky Loans." Read it and weep for how WaMu has so recklessly contributed to the financial crisis. Here are a few snippets:

— "Interviews with two dozen former employees, mortgage brokers, real estate agents and appraisers reveal the relentless pressure to churn out loans...."

— "During [CEO Kerry] Killinger's tenure, WaMu pressed sales agents to pump out loans while disregarding borrowers' incomes and assets, according to former employees. The bank set up what insiders described as a system of dubious legality that enabled real estate agents to collect fees of more than $10,000 for bringing in borrowers, sometimes making the agents more beholden to WaMu than they were to their clients."

— "WaMu gave mortgage brokers handsome commissions for selling the riskiest loans... 'It was the Wild West,' [said a founder of an appraisal company]."

— "Employees in Tampa who fell short were ordered to drive to a WaMu office in Sarasota, an hour away. There, they sat in a phone bank with 20 other people, calling customers to push home equity loans. [Said one former employee] 'The regional manager would be over your shoulder listening to every word. They treated us like we were in a sweatshop.' "

— "WaMu's boiler room culture flourished in Southern California, where housing prices rose so rapidly during the bubble that creative financing was needed to attract buyers."

Now that you've read these slices of the seamy underbelly of subprime lending, if you have a few minutes click on this clip. It's the famous "Coffee Is for Closers Only" scene from the film (and before that, stage production) "Glengarry Glen Ross" (warning: language alert). That's Alec Baldwin pictured above, who plays the Big Closer in the movie. There's a Big Closer in Gretchen and Peter's article — "a bulldozer," as a WaMu colleague described him to the reporters — who might be role-modeling this film character. 

Maybe Jamie Dimon should have run out and rented this film before agreeing to buy WaMu. (The same could be said for Ken Lewis re Countrywide.) Maybe the directors of WaMu should have had a special screening before they took this sucker down. 

I better settle down. My ire is getting to me. Let me go get a cup of coffee. Coffee is for WaMu taxpayer bailer-outers too.