Federal banking examiners found serious problems at Washington Mutual Bank at least five years before its 2008 collapse, but their supervisors showed little concern

What does the Office of Thrift Supervision do, exactly?

Federal banking examiners found serious problems at Washington Mutual Bank at least five years before its 2008 collapse, but their supervisors showed little concern, according to results of a lengthy Senate investigation released Thursday.

During those five years, examiners constantly warned of "less than satisfactory" loan underwriting, the "horrible performance" of its subprime-backed mortgage securities and the failure of WaMu executives and federal regulatory supervisors to do much about it.

One examiner said he was derided by colleagues as "the housing 'bubble' boy" for his "gloom and doom" predictions for some risky loans, and another complained that critics of subprime loans were called "chicken little."

Former OTS Director John Reich, who served from 2005 to 2009, referred to WaMu Chief Executive Kerry Killinger as "my largest constituent" in a 2007 e-mail.

Regulatory capture! What a great example for economics textbooks! An actual regulator admitting in writing who he really works for. The OTS budget the year that email was written was something like $200 million dollars.