>> $27 million -- $27,000 per inmate in the state of illinois and dirksen senate office building 5,000 inmates being released into the state. some of them have campaigning with the community renewal society on the housing bill and opportunities for people benefiting a case and committed the crime when they were 16. .. prevents them from employment and feed their family. from those, i hope you can connect with the community. you're right, people can connect with. they can find ways to give it back. a lot has to do with ignorance. i want to thank for your time today. do you want to mention the book one last time. >> "a question of freedom; a memoir of learning, survival, and coming of age in prison." it's a excellent book. it's a memoir of learning coming of age and survival in prison. "a question of freedom; a memoir of learning, survival,

and coming of age in prison." thank you. we appreciate it. >> >> "wall street journal" route order to commit tran fagg examines the wall street collapse of washington mutual, the wall street punch grand largest bank failure in american history. her attackers just over an hour. [applause] >> well, it is so wonderful to see a great crowd during one of america's great public libraries and a reminder of why the comments are so important in to welcome my friend, kirsten grind back to seattle again. sorry there is no big tank

failure to cover. >> lovely weather. >> sunny days make me depressed, but i'll get by with this weather. kirsten spoke, "the lost bank" is a great read if you want to understand not only what happened to washington mutual, which is a huge trauma for the city that continues to reverberate, that had much brighter policy implications for what happened in the great recession and how banking contributed to the amount done. there are times when you're agreed psycho thriller. we don't start out with carrie challenger and liar loans and many of and many of and many of didn't. we stared up at the guy named luke pepper. why is that? >> well, luke pepper was the ceo

during the 1980s. it is very important to start out with lou because he represents a time in the banking system that has been lost. he represents a time but makes for a much smaller and customer focused and community friendly and wamu was known as a friend of the family as you know. and lou pepper infused this bait for such an amazing culture. it was widely known across the region is a great place to do banking. it was terrific for employees who work there, terrific for customers and then all that began to change. >> well, everybody has these blind spots. and in lou's case, something you would come to rue was anybody small spokane rocher dealer and somebody who came to thank you.

maybe you have to tell us about that a little bit. >> and walked into lou peppers off if a guy 31 years old named kerry killinger. he was sharp as a tack. he knew everything about financial reporting. yet when these while performing mutual funds and everyone at the bank was just sort of in about his knowledge, as with lou and really became lou's ricochet. when it was time for lose to pass the bank onto someone else, it made a lot of sense that he passed it on to kerry killinger in 1990. at that time, wamu was a small regional bank. someone had done a terrific job of growing, but still only had $9 billion in sa and no one outside of seattle had ever heard of it really. >> and at the same time come when most people think a kerry

killinger they grew to know, that is not the person they get to know a first. i was fascinated by the background of kerry that she painted. the last guy in the world you expect to be stiff banker or a w-whiskey banker absolutely no. this is a humble guy from iowa, this classic sort of growing up childhood where people played pickup baseball games on his lawn and he married his high school sweetheart. he put himself through state school. he was very humble, very ethical, buried by the book and just very nice. he was also extremely awkward i should say. employees used to be worried about landing in an elevator with an. he was much more comfortable looking at financial reports. but there is nothing crazy or unusual about him.

>> accept you as a trumpeter. >> accept that he was a trumpeter and the play at a work and that was perhaps a little strange, but not for wamu because they'd are quirky, fun culture. so kerry was the only one in a family who wasn't an actual musician. he was a musician, but not for his job. >> and he went on an acquisition spree for at least a thrift was pretty awesome. as you tell us about that. >> absolutely. so kerry took over this small bank in 1990 and had this fabulous team of people surrounding him that lou pepper had also chosen and together they worked like clockwork. a steamboat across the west crowson across the country by

invading/didn't write this history of the mergers and acquisitions spree at the 1990s. there's a crisis and go in on family savings and loan crisis and wamu was able to buy up smaller bank and so they grew rapidly through the 90s and by the end of the decade they had become the country's largest savings and loan bank across the country. and kerry killinger had become america's favorite thinker. everyone loved wamu. everyone loved kerry killinger. they could do no wrong. they had the subject we all know now, which is free checking account. you could go to wamu and not pay any annoying fees you pay other banks and they essentially forced to the other banks to follow suit. said they were just the most popular come to me anyway. >> now, they were very good at some of the hard things and a financial services acquisition, merging computer systems.

they would do it over a weekend. tell us a bit about that. so the customer would not even feel anything monday morning. >> absolutely. we don't think about these things. we think of our bank is a bank, but when it by another bank, it's a complicated terrifying proposition because you simply have to banks and you combine all the systems and they do it very quickly so that customers don't notice. well, wamu is an expert at that and that is the key to any banks trying to make all these large acquisitions. they were able to do this in the way the customer wouldn't notice. this is a bank that was efficient at anything they did. and when they came into these other banks, they were very frugal. they took away all the corporate credit cards, all the jet planes. they took away -- these other bankers would have outlandish bank accounts and offices

decorated like the wild west with lots of expensive trappings and high-rise office buildings. wamu came in a cupboard above that. they flew coach everywhere and were very frugal. >> at least at that point. >> again, we're still in the 90s. >> there was again almost like a thriller this foreshadowing, this small nothing wonder called long beach mortgage. >> so long beach mortgage based near disneyland in california. >> maybe give us a set of asset size so people can understand this shouldn't have meant anything in ended up being quite consequential. >> so it was a tiny fraction of the assets of the last acquisition wamu did. it was an afterthought.

this company may sub prime loans, mortgages to people whose credit was not great. so wamu speaking at the time was well, we have all these requirements under the community reinvestment act and that is when you are basically required to make loans to these people in some capacity. and also subprime lending has become extremely popular in the 90s because prime loans for conventional mortgages that were making much money anymore. so why not us wamu's cheese guy, named craig tolle were not looking for a good subprime lender and landed on long beach mortgage and quite honestly with the least dodgy about the sub prime lenders he could find because there is a really shady stuff going on in the accounting of these companies. so they ended up coming even after opposition internally buying the small subprime lender

in the late 90s. it is the first time they really broke away from what they had been doing originally. >> what was said about long beach that would weaken the cancer that overwhelms the system click >> is great that you call it a cancer because it really was like that. when they bought long beach it was like a cancer cell. there were several things about it. a big thing that a lot of people pay attention to his long beach was in california, which very much would become the epicenter of sub prime and risky mortgage lending. so it was far away from seattle's headquarters where everything was being controlled. also, these mortgage brokers come on long beach was not the kind of lender for you walk into a bank in taxi summoning and get your phone. that is called retail lending and that is for wamu had been mostly beforehand.

long beach didn't actually talk to any people come into contact to the customer. they just bought loans. about funds to mortgage brokers, which didn't work for wamu. so there are these dirt party people out there accumulating out these loans. so that is a very unsafe system because there's no quality control involved in that. >> we should make the point that one of the reasons the reinvestment act came in is because the banking industry had our defendant core areas and there's this kind of tinfoil hat conspiracy theory out there that the reason we have a bank e-mail them and the 2008 was just because all these minority deadbeats bought mortgages. and that's not the case and that's not what the community reinvestment act was about. but it did require a certain compliance. but the big thing that should

eliminate in the book is that this is not just altruism. sub prime lending was incredibly profitable. >> ambassadors for pain time or money than any conventional mortgage. some in the mortgage business everything is driven by the end investor, which is wall street and their customers. so they could make far greater returns on these riskier mortgages than they could make on our particular 30 year mortgage. is it because of that, they're suddenly became a huge incentive to make more sub prime mortgages and other risky loans. >> wall street buys stake in this place is come a said, cells that. it is hugely profitable and it seemed as risk-free because housing prices will never go down. mortgage payments are made reliably and then these lending institutions get pressure back

from wall street. we want more, we want more. >> exactly. >> that there is a point in the book long before the housing bubble where under killinger wamu gets in trouble. what happened? >> while comedy and she's thing about wamu is a lot of people like to paint this picture that all their problems have been in the three years before there to designate failure. the problem at wamu started long before that. we can point to 2000. that's further than they would downhill. one of the biggest reasons they did is because of his that that point this out to sit up and said we want to become the country's biggest mortgage lender and he internally began to push into risky mortgage lending soon after that. their slogan turned from friend of the family to the power of

bs. the power of bs with this slogan plastered across times square and new york on billboards across the country and that is what they were really dedicated to. so that bush really got the ball rolling. >> now before we get into the good stuff and it's all good status, one of the differentiations i make as a cover banking and charlotte with hugh mccall and crutchfield as they were going on the biggest banking acquisitions in history and they were a wheel commercial banks. washington mutual was the risk, it was a savings and loan. this would matter a lot later because to my mind, and i just watch her reflections on this. washington mutual was this kind

of jurassic park survivor of the savings and loan industry, most of which had collapsed in 1989, named 290. and yet, washington mutual continued on. the commercial banking industry didn't like the thrift curmudgeonly competition. they wanted it to go away. but with the savings and loan collapse, the remaining snl's were folded under the fdic. there used to be a federal savings and loan insurance. but they didn't have shirt and advantages the bank said. for instance, they were not regulated by the comptroller of the currency or the fat. they didn't have the political pull. so it is america's largest banking failure, but it also seems like this gargantuan jurassic park institution was in

many ways played the role of the bank appeared to have a trading desk, but they didn't have the advantages of a bank of america or a walk over yet. >> that's an absolutely good point. absolutely. they weren't actually a bank if you will. and it's important to point out under their charter as a threat. wamu had to make a percentage of mortgages. it wasn't that they one day decided to make mortgages. they were always making mortgages because they had to. it was just that they went down a different road than they had been previously. >> very different. hugh mccall and nationsbank, bank of america hated two things with the passion. he hated mortgage lending and he hated investment anchors. take that for what it's worth. things started to change.

kerry changed, a very tightknit management group started to grow apart. maybe you want to walk us through that. >> said two things started happening a bouncer at 2000 timeframe and this is a crucial timeframe for sub for. kerry killinger began to really believe that wamu should be an east coast institution. he really became obsessed with this notion of having the bank of p. without these giant tanks on the east coast. and at the same time, he began to change personally. he left his wife of 30 years and she had really been credited with keeping them grounded. he remarried another, yes, linda killinger who was a lot less though and both became much more obsessed with the trappings of the ceo after banning corporate

jet for the span of the ceo career, they were suddenly find corporate jets all around the country. they became -- they balcom you may recall we have a giant new skyscraper built around that timeframe when kerry became obsessed with all these things that he's not a big bank should have. so he was really changing personally. at the same time, the bank was so large, he was bringing in august and executives from from the east coast. it is really becoming a very different culture, so a lot of people that have been there for more than a decade began to leave. they were frustrated. they didn't get along with the east coast people. and that of culture clashes in the culture began to deteriorate. >> wasn't there also concern on the part of old-timers about the safety and soundness of the bank

and they are doing from the land they doing? >> absolutely. you know again, a lot of the problems were already bubbling to the surface at this point. almost just two or three years after they brought long beach mortgage their started being whisperings of fraud going on and the mortgage unit in california. you know, the series of things are bubbling to surface. people were trying to bring them up. they kept getting shut down. in 2003 they launched this internal investigation led to the legal team and found that basically a huge chunk of mortgages they were making and selling to investors around the world are just garbage. this is in 2003. remember couple years ago we heard all about how banks can really, and this is still going on by the way, but really came into the limelight a couple years ago.

tanks can foreclose because they didn't have the paperwork. wamu had no paperwork in 2003 at long beach. people's mortgage files were bitterly a scribbled recent paper in a file and said they had to go through into a massive overhaul and i was long before any of us would ever hear anything about sub prime loans. the >> why did killinger change? >> i mean, you know, that's a good question. i spent a lot of time asking people that very question. i think that it's very hard for anyone to stand up and have the whole country tell you over and over again how great you are and how you're the best thinker in the world and how your company has achieved this massive feat in only 10 years and you eat near prophet expert patients every year. at some point you begin to

believe your own press and that's really what happened in this case. he really began to believe his own press and he really became a different person. in some ways he became better. he became much more charismatic. he was no longer awkward. he started wearing fancy clothes to work and didn't wear his awkward looking glasses anymore, things like that. but he was a different person. >> and to be fair, he declined to talk to you for the book? >> yes, you may seem he read a letter of us. >> i think you liked it but that is the whereupon the book, that he made clear his dissatisfaction. so let us set the stage. the.com crash happens, the recession of 2000, 2001.

the enron scandals, worldcom and the others and all this capital in the world looking for someplace to go. and alan greenspon, disciple of vineland from the true story, flood the markets with cheap credit and i'll bet money that it ran on wall street goes into real estate and lending and mortgages and it's not just the american tree and many more to a liberty and pursuit of happiness. you've got to have a house. if you don't sell the house every couple years are not being a tragic and you need to flip houses. it seems so long ago after robert ran through and yet it was just yesterday when this radical change comes about. this changes the capital markets

completely ups the stakes for wamu and reveals tremendous fault lines. >> saw this money is flooding the system and it essentially becomes the wild west adding california specifically in terms of mortgage lending. so for this book, one of the most eye-opening parts is when i spent a good month in california interviewing loan officers and mortgage brokers who were part of this craziness at the time. it is not an exaggeration when i say that literally dead people reputed mortgages. in fact, there is this -- i couldn't believe it when i heard it the first time. there's this one and it showed in the book that wamu's chief legal officer, fay chapman told me they were investigating one

of the loans coming to the bank and there was this guy whose name is josé florez and it was supposed to be this 56 wrote gartner. they ran a social security check. either way, the only brand because mortgages were under review. they never were different such an extensive check normally at this time. they find out this guy is actually dead. so they go to josé, who is actually a 23-year-old guy and say your social security number says you are dead. and he says okay, hang on. a new leaves and comes back the next day with a sheet of paper that says i am not dead. i am right here, josé florez. at a chapman has literally kept a sheet of paper because she could not believe it. this is the sort of thing happening all the time. and we should say is that point wamu as a mirror for what happened to the entire banking system. to the entire banking system.

to the entire banking system. point wamu is leading the charge comes with everyone, almost every financial institution was going forward as well and wamu is frequently competing with countrywide to make the most option arm mortgage and sub prime mortgage and all these risky mortgages. >> was there an understanding in the front office of the complexity in which these mortgages were being ratcheted up the food chain? >> there was wamu as an wamu headquarters said please had some understanding as they celebrate to believe they had some understanding. at the ground level, absolutely not. these loan officers frequently nuclear making mortgages to people who had no chance of paying them back at all. but in the back of their heads

they been told by headquarters wall street is buying them and wall street will do something with them. so these people who are just normal people at the street, a lot of them don't have degrees, but they're making a ton of money and commission are being told wall street will take these mortgages and somehow the risk is going to disappear. so they just really believed that. is that these guys on wall street at phd's and mbas in all this, so let's keep making mortgages and were making a ton of money, why wouldn't we? >> the algorithms looked good at the time they say. i'm not the case of bank of america and for the banks i covered the regulators were highly calm her mast in the sand that people in the office of the comptroller of the currency and the said were trained in charlotte at bank of america and first union. and these banks have spent literally hundreds of millions

of dollars to get glass-steagall root io and to get the latest regulation possible. what was it like washington mutual is in the regulators? >> so washington mutual's main regulator to longer exists actually. the office -- the ots, office of thrift supervision was formed after the savings and loan crisis and so of the banking regulators have really had this inferiority complex. it was much smaller. it didn't have as much power. and it wanted to be regulated more banks. and so that sort of need for power really colored how it was regulating the banks because it did really care so much what the banks were doing, just that it had allowed it ranking sites under its control and that also

dig deeded its budget, right? said the ots was regulating both wamu and countrywide and a lot of other mortgage lenders. and so you soccer is very lax regulation. bush is not a lot of attention paid to what was going on. >> when the crisis really pecans unstoppable, there are efforts need to save the institution. handicap the zephyrs for us. what are the chances? >> of wamu surviving click >> i want to get into that later. but when private equity decided to put money into those, if

insight is a little breathing room. killinger is forced out. there's a new ceo for what, six weeks. >> so the crisis, they say it happens slowly and then quickly and never set foot case at wamu. it began to get very bad. all of their issues internally, their internal controls at all in art. at one point they were making mortgages on 12 different systems. they had grown so fast that there is no control internally. their mortgage division had lived out of control. they had this massive trading desk. it turned into not a mortgage lender as they were only 15 years earlier when someone was there, but a mortgage middleman when they were a mortgages and spitting them out and making money in between. so they had turned into this just as housing prices have been

going up astronomically every year began to crash, really began to crash. so sad they wamu is left holding all these risky mortgages and all the homeowners that could've just refinance couldn't anymore because the housing prices went there to support it. so suddenly wamu, which has been profitable for how many years at that point, kerry killinger had always delivered returns were eating away at capital cushion he needed more money. in the spring of 2008 they decide we are either going to try and sell the bank or we are going to raise private equity. no one wanted to sell the bank. everyone wanted to keep it independent. jpmorgan chase, jamie diamond was thinking about asking kerry if he wanted to bite you ever wanted to. they successfully raise $75 in

equity from this group of financiers tpg anaphora.okay, they've made it through. they've raised a lot of money. they have the backing of this great group of people. a lot of people.that was the turnaround point. >> know what i find interesting and one does not have it be a conspiracy nut to start see these things but the timing was just off, you know, nested type that much, maxwell smart on so many friend because there came a point where they said and overruling shoot a bear at the dac, tim geithner and hank olson said were going to back everybody with everything and were never going to have another wamu. the washington mutual did not

have political pull in washington d.c. washington mutual was not a new europe bank -- new york bank. yet there is this how the part in the new york branches. as for the regulators throughout the real power don't care. she let there wants to shut it down and meanwhile something interesting is happening in new york with rumors that started at least a bank shot. >> you can call it a jog, guess. politics becomes a very important issue. kerry killinger had never made a priority of the net relationships in washington d.c. he never did. since wamu it did not have any friends. meanwhile bankers like jamie diamond who considered it their

seventh line of business. so wamu suddenly finds itself even after it raised all this money in the summer of 2008 in the middle of a panic situation. you all may remember we saw those pictures of the lines around the block and people pulling out their money and it was like it's a wonderful life and how could this happen and everyone panicked. what no one knew is that wamu suffered a wound that was far bigger and they did it very quietly. no one knew about it at the time, but they were losing massive amounts of money every day. so kerry killinger, very panicked about this run called hank paulson, ben press secretary knew there was going to be negative media report and was scared it would cause people to pull their money out. he gets hank paulson on the

phone and tells him essentially there is no help coming because he said it sold to jpmorgan chase and that is when it becomes obvious that wamu has no friends in washington and that is a dire circumstance to be and as you enter september 2008. >> and there's a whispering campaign in new york against washington. >> exactly because jpmorgan did not get the bank in the spring. jpmorgan is not a bank. they were not happy to have not one wamu in the spring, so they were off on the sidelines writing the time until they could return and have another opportunity. so you can bet they were taken that opportunity to meet with regulators, top with regulators and often about wamu. >> now we were both on the story

for different publications, covering at the same time. i'm a columnist come to you are a reporter. but this book is made up of so much more than that. tell us a little bit about the difficulty of really getting to the bottom of some of these are pouring, what was really going on with the fdic. they didn't just respond to your freedom of information request. >> no, they didn't. well, a lot of the work we did in public record request. i was a reporter at the "puget sound business journal." i'm sure we will all never forget when they received those e-mails. we were trying to piece together what exact we have happened in the three weeks before wamu fails because it is extremely secret. no one was talking about it.

and that the government agencies to talk to us. so we requested out these e-mails that itch at wamu down and they all came back completely blacked out. i'll you can see in the subject line the wamu. we're just so it ought that the only art in this book is one of those whacked out e-mails. we still have hundreds of them. even during the boat assays, i can't tell you how hard it was. the last chapter is just a blow-by-blow of what was happening in seattle in washington d.c. and new york and it was like pulling teeth. i had to rely mostly on public record to piece exactly what was going on because even three years later no one wanted to talk about it. it's very controversial sale. >> and there are a lot of ruined lives, broken heart, including

lou pepper. >> yeah, someone one of the tragedies of the story as kerry killinger was making all these decisions to build upon risky mortgage, lou has started writing these letters to kerry and others at the bank saying you shouldn't go down this road. this is not the way to go. you need to get rid of all these loans. you know, the culture had changed so much of the bank but now they were focused on being driven instead of some of their long-standing values of being fair and caring and human and lou was so upset about this. but you can imagine it is 2005 and lou had been away from the bank for so long to many shows that everyone is busy. who wants to deal with this guy battling around the office. so is just a tragedy all around.

>> and gas lou is so beloved. >> exactly, yes. >> was surprised to the most in your writing and reporting of this book quite >> one of the things that surprised me and continues to surprise me every single day of the headlines of how much the regulators were able to get away with. it is astounding to me in this country that we have these gigantic financial institutions and even smaller ones come you know, like we just saw the huge collapse in iowa at the brokerage firm and so little regulation leading up into the crisis the regulators of sub for were so focused on turf battles, who was in charge of regulating wamu. should it be you going to do the exam rather than actually doing the exam are paying attention to what was going on. so it is unbelievable to me stealthily.

>> and they are essentially their paychecks depend upon regulating lightly, even though our president is a socialist muslim islam or fascist goldwater republican. it continues to this day. >> it continues to this day. before this very talking about the latest scandal, which is libor. you can pretty much up in the paper and laid about the latest regulator met. >> libor. wow, kirsten, we're going to take questions come but thanks for a wonderful elimination of the boat. and the people have written questions that we don't have a mob scene and they will bring them down. i've been told to ask tumor

questions. how come you got to go with "the wall street journal" and i didn't? nevermind. [laughter] we would get back to that later. what is happening to kerry? is he still around town? >> kerry is still rattling around town i hear. during this sort of midlife crisis stage he bought a couple houses in palm desert, so he spends part of the time. >> did he get a no doc loan? >> you know, i never investigated the mortgage on the palm loans. >> it is not welcome at? >> and now, i never see his name on the invite list. his ex-wife, debbie, is though. >> she has been rotella? >> he is the president of wamu had arrived just for three years

and so pretty much the second the bank said he moved back and i hear he is working in financial services, but not anywhere we would've heard of. >> and the shareholders wiped out quite >> wiped out. >> and you have a very effect intended bookend. i don't want to give away too much. >> it is that the bank failed at the end. >> well, we know that much. but you actually, he met with people who were not the high rollers, who just believed in the seattle thrift. >> that was the sort of misconception about shareholders. they were just short sellers in last days. there were a lot of mom-and-pop people in washington state across the country who had invested in wamu in the ipo since the 80s.

>> that looks like a thick stack. >> we have a thick stack and i'll take off my glasses so i can read. i am not screening this in advance, so if you have written ogura, booker, book or it will be a national television. i've asked this before. why shouldn't mr. killinger being present? [applause] >> that's the best question to ask. so we talk a lot about the regulators, but we haven't talked a lot about the regulation. so there have been multiple investigations into wamu, including the extensive investigation has had many of the other financial institutions and the short answer is there is literally no law at the time still not to be honest that they could hang these guys on. they literally could find

nothing illegal. and it wasn't for want of trying. and that is slightly so as not seen any height of executives go to jail and why they are still trying to push forward all these massive financial reform they haven't been able to do. >> i don't know if it was for want of trying. >> they tried. >> when you have a corporate lawyer as attorney general and the banks frankly on the places to turbine said about the senate, and there was an urge to prosecute. there were three questions on this. i will forget you come i just want to be to others. if you could change any part of the book, what would it be? >> that's a good question. i wonder if they mean if i would've written something differently or if the books history could have been different. the first one. if i would've written something

differently. that's an interesting question. i mean, i would've love to actually talk to kerry killinger. so that would've changed the rating. i could've spent the entire book talking about the last month because there is just so many politics that went into the decision about how wamu was seized on the east coast that we never knew about out here. >> yeah, very illuminating. has anyone been prosecuted, particularly executives? >> no, they have not. >> there was a fizzled attempt that led to a settlement. maybe what you briefly tell us about that. >> said the fdic, the regulators

that shut wamu down made an attempt to sue kerry killinger and the head of the mortgage division and a suit for a billion dollars, which was unheard of basically and ended up settling out of court for a fraction of that. ii think the 64 million or something ridiculously low. most of the settlement was covered by the executive's insurance policy at the bank. but they have paid almost nothing either. >> they got away with it. >> yap. >> of forget-me-not charity come back to you. for those who had shares in sound saving which was merged with wamu, is there any chance their shares are worth anything? >> publicly not, no. >> how would one find out? my suspicion is don't waste of brain damage. >> i mean come you would have to look to the bankruptcy court filing that the holding company,

but one wamu had seized had seized and they have a blink reached a settlement earlier this year, so shareholders did get a little bit back, but hardly anything. >> you think jpmorgan chase got an extraordinary deal on that ship that jamie has implanted in my head full text to guide me around in just a minute. let me finish the question. an extraordinary deal on the wamu assets or was low price justified by the associated problems? >> so, jpmorgan paid $1.9 billion for a bank with $307 billion in assets. so they absolutely got a screaming deal. now they felt i was justified because of all these terrible mortgages. but let's be clear. these terrible mortgages have

not kept jpmorgan from being profitable. they have barely dented the bank. and meanwhile, the reason it on and wamu anyways i was vast branch network across the country and especially the west coast. it doesn't abridges. jpmorgan is really only in the east coast. they have those branches now and are doing great. they got an amazing deal. the deal of the century. >> too big to fill that jagr and the last major corporate headquarters. what about the auditors deloitte & touche, what about the board? why didn't he blow the whistle? fidonet come forward? >> well, the auditors have been the most under examined have any group during the financial crisis. and none of vent to my knowledge, i could be wrong about this to the whistle at

wamu. the board was very much low. many had been on the board for years and were very much low at the amazing performance kerry killinger had been delivering. they were and ask any tough questions until it was too late and weighted mixture a long time to get rid of kerry killinger and put a new management initiative done it a year or two before that. >> these weren't even independent directors. >> they were among the highest-paid port in the country, second only to let goldman sachs are some rain. >> you can see what money pays for. did the wall street collapse very -- and every democratic? banks in the u.s. and washington? did i get that right?

does that make sense to you? no. >> we lost our biggest financial institution. jpmorgan took over, we don't have a major bank headquartered here anymore. so what were the consequences of that beyond the ecosystem that was thousands of employees and vendors and so forth? >> absolutely. of course in the seattle area it was a massive loss and massive effect here. but as you pointed out, too big to fail institutions got bigger. so now instead of this bank that had been integrated into seattle and in this area is gone and we have five banks that are really controlling most of the assets in this country.

and >> and they are not here. the ceo doesn't live here. they don't contribute to the community and the same way. weak sec captured regulators ensured a mess. so what is to be done? >> i mean, if i had the solution i don't know what i would be doing, but maybe it's the next that. i don't know. i don't really know what the solution is. i mean, they're having trouble passing dodd-frank, which is our financial reform. even with more regulators in place, we are still not making embryos and regulating financial institutions. to actually breathe them out, that is an incredibly difficult proposition . the way out is en masse. >> i could fix things if i were king.

break up the too big to exist banks, ring back glass-steagall, 30 pages, real simple. put in place incentives at the banks don't gamble because then there's a transaction tax and so they actually invest in making loans for project of economic activity. you put in place incentives that they are not compensated excessive risk-taking and repeal citizens united and get politics out of the system. [applause] ima columnist. she actually reports the facts. you mention that wamu had no friends in washington d.c. why do you think we haven't heard a lot from our representatives such as murray and camp all quiet >> that is such a good question. actually at the "puget sound business journal," we've reached out to her on multiple occasions

because after wamu collapsed, she made this big show of coming out and saying we're going to lead the investigation into this collapse. we are going to figure out what is going to happen and then it was like a radio silence. she has been extremely quiet on everything and didn't do anything for the book either in its basically, to my knowledge, kind of ignored offense and the same with patty murray. [inaudible] >> cantwell. >> balbis question says what do you think of the aftershock scenario for the u.s. economy and how it affected too big to fail banks, and if i read this right, the rest of us? >> the aftershock. >> i can speculate on what the aftershock of that days. the lingering cloisonné depression, the slowdown in asia, the year is en masse and

the fact that the financial system is still engaged incredibly risky behavior. are we talking about stiglitz here? will go with my theory. what do you think? >> well i mean, everyone is affected by all of these things right now. you see jpmorgan chase's massive trade and must basically a bad than in europe, right? but in a way, these institutions are so vague that they are shielded because even with the massive trading moms, you still see jpmorgan reporting profits, said they are all very fact dead, but we have created this system with the baker just gigantic. >> and they know they will be felt up to the taxpayer. the backroom is what economists call moral hazard.

>> describe -- this is a great question because we get a little bit to match inside a stall in the financial journalism world, all three of us. describe the problems inherent in the option armed product and its aggressive push by wamu. >> we actually didn't get into that. everyone knows for is some prior planning, but one of the more riskier product and one of the biggest product is the option armload. so this is an incredibly dodgy mortgage for you can actually choose between various options each month of how you pay your loan. even that concept is unbelievable. so one of the options is to pay the minimum balance. if you chose that option, then the mighty work paying this tax down to your principal. so you are accruing debt. you just don't know it because you are fooling yourself

thinking you pay the minimum now, which by the way everyone across the country did for the most part. because when you get your mortgage bill, why wouldn't she pay the minimum amount? what happened is all these homeowners are adding to their dad, that wamu could sell this option arms for ridiculous amount of money to wall street. they are easy and enough like crazy. so part of the big push was to put an option on mortgage, so they were making them like crazy. >> and amazing. underwater city. how early with their negative publicity about wamu and where was that? i assume publicity includes press reports. >> so wamu had a big blowup in 2004 that wasn't really heard

about. what had and is we spoke a little bit about how they basically had no infrastructure at the bank. they're operating on 12 different mortgage systems. all of that emerged in 2004 when they began basically trying to foreclose on homeowners who would actually pay their mortgage. and the reason they did that and say it's literally forgot to tell someone to open security boxes unopened homeowner shacks. this is how bad it got. so state started suing, analyst started ryder report said these guys can't run a mortgage operation. they finally forced kerry killinger ticket to chief operating officer, which was steve fratello. so they were experiencing that was the day before. during the financial crisis, i think it was starting to get pretty bad in early 2007.

>> and of course tv has a way of amplifying things that are different than the price. thank you for your book. am i alone on server 21 years experience in seattle and i can say quote, you got it right, unquote. this person's question is other than paul krugman, i don't recall any journalist saying this is a bubble in 2004, 2005. did anyone else call it? esa did kill one of the reasons i was thrown under phoenix. did you? >> now, absolutely not. >> i think it was -- there were people in the financial press who are raising questions, but there was also the economic orthodoxy. most economists were very reassuring.

add the platform of columns so i could follow the story. he was an economist and not a journalist. to jpmorgan gain any name due to this wamu failure? jamie, are you out there? anyway, to jpmorgan gain anything due to this wamu failure? >> ask him if they did nothing but again anything. they gained more than two 2000 branches across the country. all of those employees gain the presence that wamu had and they got it for basically no amount of money and this pesky mortgage problem they had to deal with. ..