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Ex-WaMu execs defend bank's actions before failure

WASHINGTON - A trio of former Washington Mutual officials and a trove of documents Tuesday portrayed a pattern of breakneck loan-making and alleged fraud at the biggest U.S. bank ever to fail.

Former chief executive Kerry Killinger defended WaMu's actions at a Senate hearing and insisted the government should not have seized it at the height of the financial crisis in September 2008.

Killinger argued that WaMu had adequate capital and shouldn't have been shut down and sold for a "bargain" price of $1.9 billion. The bank "should have been given a chance to work its way through the crisis," he testified at a hearing by a Senate panel.

The 18-month investigation by the Senate Homeland Security and Governmental Affairs subcommittee found that WaMu's lending operations were rife with fraud, including fabricated loan documents. It concluded that management failed to stem the deception despite internal probes. The bank's pay system of rewarding loan officers and sales executives for their volume of loans closed ratcheted up the pressure, the investigators found.

Sen. Carl Levin (D-Mich.), the panel's chairman, has said it will decide after its hearings this week whether to make a formal referral to the Justice Department for possible criminal prosecution.

Two former WaMu chief risk officers said they tried to curb risky lending practices by the bank. But they said they met resistance from top management when they brought their concerns to them.

The 119-year-old thrift, with $307 billion in assets, was sold for $1.9 billion to JPMorgan Chase & Co. in 2008, in a deal brokered by the Federal Deposit Insurance Corp.

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