WaMu failed because of run on bank, former regulatory chief says

By Jim Puzzanghera and Clement Tan

John Reich, who was director of the Office of Thrift Supervision, tells a Senate panel that Washington Mutual’s 2008 collapse resulted from a drop in public confidence, not a failure by his agency.

Reporting from Washington — The former head of the chief banking regulatory agency that oversaw failed Washington Mutual told lawmakers Friday that the giant savings and loan collapsed because of a run on the bank, not failures by him or other regulators.

The testimony of John Reich, who served as head of the Office of Thrift Supervision from 2005 to 2009, came as a Senate subcommittee released the results of an 18-month investigation that blasted regulatory supervisors for doing little to halt risky practices at WaMu that bank examiners had identified as early as 2003.

The criticism was echoed by a report this week on WaMu’s collapse, the largest bank failure in U.S. history, by the inspectors general of the thrift agency and the Federal Deposit Insurance Corp.

Reich said WaMu was seized by regulators on Sept. 25, 2008, because of a $16.4-billion run on deposits after the sharp decline in the economy throughout the year and the failure of Lehman Bros. and the bailout of American International Group Inc. just days earlier.

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Campaign finance legislation faces tricky issue of foreign corporations

Reporting from Washington – Proposed legislation to block foreign companies from contributing money to U.S. elections could end up affecting well-known companies such as Chrysler, Anheuser-Busch and Citgo, according to legal experts and company representatives.

The legislation is a reaction from key House and Senate Democrats to a Supreme Court decision in January that struck down a portion of the nation’s campaign funding laws, allowing corporations to freely contribute to political campaigns.

The high court’s 5-4 decision in Citizens United vs. Federal Election Commission seemed to open the way for U.S. subsidiaries of foreign corporations to also contribute to campaigns.

The legislators say they are now considering a broad definition of foreign corporations — companies that are more than 20% owned by non-American entities. That could end up banning thousands of corporations from contributing to political activities.

Chrysler would be affected because the Italian automaker Fiat has a 35% stake. The oil company Citgo Petroleum Corp. was started by an American oilman but has been wholly owned by the Venezuelan state-owned petroleum company since 1990. St. Louis-based Anheuser-Busch, the company that brews Budweiser, was bought by Belgian brewing giant InBev for $54.8 billion in 2008.

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