Former executives from WaMu will be testifying throughout the month of April. WaMu was formerly the United States’ largest thrift, and is currently the largest bank failure in U.S. history. After reviewing millions of pages of documents and conducting over 100 interviews, the Senate Subcommittee has concluded that WaMu associates were rewarded for writing high-risk loans, and that there were indications of fraud in the completion of many loan applications.
Dating back to June 2009, the Senate Subcommittee had subpoenaed several financial institutions, including Goldman Sachs, Deutsche Bank and WaMu, seeking evidence of fraud in the subprime/credit-crisis meltdown of 2008.
The Chairman of the Senate Subcommittee, Carl Levin, emphasized that the goals of the hearings are educational, and that the Subcommittee’s intention is to formulate an accurate public record of the facts to better understand what happened and to hold perpetrators publicly accountable. According to Senator Levin, the hearings are also intended to inform the legislative debate concerning financial reform and to provide a foundation for future regulatory measures.
Congressional fact finding hearings such as this one do not usually have larger legal effects in the sense that the Senate Subcommittee cannot issue binding resolutions or orders. Indeed, some critics charge that such hearings are of little value and a waste of Congressional resources. However, unless the former WaMu executives invoke their Fifth Amendment right against criminal self-incrimination in their testimony, the hearings are expected to serve — at the very least — as a means of identifying potential defendants for future D&O litigation relating to the bank’s failure.
