Levin probes banks, toxic loans
As Congress dives into one of its first big post-spring recess issues — financial reform — Sen. Carl Levin kicked off the final leg of the largest investigation on Capitol Hill into what caused the near collapse of the nation’s financial system.
Levin, D-Detroit, on Tuesday launched hearings by the Senate Permanent Subcommittee on Investigations that focused on high-risk mortgages given by banks to homeowners who either weren’t aware of loan terms that resulted in skyrocketing payments or couldn’t initially afford the terms. Levin chairs the committee.
The subcommittee’s first target is Washington Mutual Inc., the Seattle-based savings and loan institution that in 2008 became the biggest bank failure in U.S. history after billions in toxic mortgages clogged its balance sheet, forcing federal regulators to seize the bank and sell its good assets to rival banking giant J.P. Morgan Chase.
Levin’s subcommittee has been reviewing millions of pages of documents over the past year and a half, looking into lending practices at the bank, which many experts have considered to be emblematic of the free-wheeling, out-of-control lending that underpinned the nation’s housing market collapse and, in turn, the recession. In his opening remarks, Levin said the group has conducted more than 100 interviews and depositions.
In a statement, Levin said banks like Washington Mutual “built a conveyor belt that dumped toxic mortgage assets into the financial system like a polluter dumping poison into a river.”
The next hearing, scheduled for Friday, will focus on how federal banking regulators handled the crisis. Among those expected to testify are Jon T. Rymer, inspector general of the Federal Deposit Insurance Corp., and Eric Thorson, inspector general of the Treasury Department.
Levin’s hearings come as the debate over financial systems reform heats up on Capitol Hill. Republican leaders attacked legislation introduced before the recess by Sen. Chris Dodd, D-Conn.
Sen. Mitch McConnell, R-Ky., the minority leader, blasted Dodd’s bill that would increase regulation on banks and impose limitations on how much of the financial system one corporate entity could control.
Meanwhile, Democrats have launched a campaign urging voters to voice support for the bill, airing television ads in support of the reform measures.
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