Why Did WaMu Fail, Again? Oh, Yeah.

At some point in the near future, we know we'll read a long, detailed explanation of every false step and bad decision that wound up destroying a 119-year-old Seattle institution.

Our basic understanding is that WaMu made a lot of bad investments in crappy subprime mortgages. And with the benefit of hindsight, we know just how bad those investments were.

Until that long, detailed, possibly Pulitzer-worthy article appears (who's writing this? John Cook? Mudede? Van Baker?), we'll make do with this illustrative paragraph from Michael Lewis' recent article for Portfolio called "The End of Wall Street's Boom":

The juiciest shorts—the bonds ultimately backed by the mortgages most likely to default—had several characteristics. They’d be in what Wall Street people were now calling the sand states: Arizona, California, Florida, Nevada. The loans would have been made by one of the more dubious mortgage lenders; Long Beach Financial, wholly owned by Washington Mutual, was a great example. Long Beach Financial was moving money out the door as fast as it could, few questions asked, in loans built to self-destruct. It specialized in asking home­owners with bad credit and no proof of income to put no money down and defer interest payments for as long as possible. In Bakersfield, California, a Mexican strawberry picker with an income of $14,000 and no English was lent every penny he needed to buy a house for $720,000.

It's at times like these that we realize our decision not to buy a house a few years ago, when we knew we couldn't really afford it, despite the attractive come-ons, was not a sucker's decision but dodging a bullet.

Trivia note: Just this year, Seattle's lost two Fortune 500 companies that were headquartered in town. What was the first? (We're not just talking downsizing or shrinking value -- we're talking gone. Gone, baby, gone.)

"Wamu Towers" courtesy of S x 2, from our Flickr pool.