No Associated Press content was harmed in the writing of this post
While the different players and events in last year's financial crisis seem somewhat blurred now that some time as passed, the collapse of Washington Mutual (WaMu) was the biggest bank failure in American history at the time. It was (unsurprisingly) a particularly huge event in Washington state, where the bank was headquartered, so naturally folks there still have an interest in finding out more about what exactly was going on as a major player in its economy disappeared from the face of the earth.
Looking forward may be all the rage in the capitol, and major media outlets may be more comfortable presenting fawning portraits of those directly responsible for the meltdown up to and including Fed Chairman
Helen Keller Ben Bernanke, but out in the hinterlands there are local organizations like the Puget Sound Business Journal, and journalists like Kirsten Grind, who are interested in poking through the wreckage.
In the course of an extensive investigation Grind attempted to answer a very basic question: Why was WaMu so hastily forced into liquidation? The immediate retort from various haughty champions of the status quo usually goes something like this: WaMu had massive subprime loan exposure. The writing was on the wall, and considering the turmoil financial markets were in the last thing regulators wanted was to wait until the body actually hit the pavement. Showing an active and energetic Fed that was willing to jump in was better than doing nothing and risking a full blown panic.
Fine, fair enough - as far as it goes. The problem is, it does not go very far. We do not know what WaMu's subprime exposure was, nor do we know if that exposure was enough to make it insolvent. (It also does not seem to square with current circumstances. Wells Fargo looks to be catastrophically exposed to commercial real estate right now, but no one is arranging a shotgun wedding.) In fact, there is a scarcity of actual facts about WaMu - hence the need for an investigation! If it really was so bad, let the details come out so these assertions are supported by evidence. Such skepticism was once considered a necessary component of journalism and not the mark of a wild eyed conspiracy theorist.
Grind filed FOIA requests with the Office of Thrift Supervision (OTS) and the Federal Deposit Insurance Corp. (FDIC) for emails with WaMu officials that she hoped would explain the seizure. The OTS flatly rejected the request, but the FDIC's response was breathtakingly arrogant: It released, CIA-style, hundreds upon hundreds of almost completely redacted emails. Grind also reports "Both agencies have declined repeated requests to answer questions about how they decided to close WaMu."
In 1993 Daniel Patrick Moynihan famously coined the phrase "defining deviancy down" to describe the process of "re-defining deviancy so as to exempt much conduct previously stigmatized, and also quietly raising the 'normal' level in categories where behavior is now abnormal by any earlier standard." The same dynamic seems to have been happening in our government since 9/11. For instance, we are defining depravity down: Once upon a time we did not torture. Then we only tortured if there was a ticking time bomb. Now it is acceptable to torture for "vital information" even if there is no ticking time bomb; the unprovable argument that it saves lives has become sufficient.
Look also at federal agencies' stance towards transparency and the public: First there had to be wholesale redactions because of national security concerns; then they were needed to suppress inflammatory disclosures that could cause hostility towards soldiers in a war zone; now it is being used to keep potentially embarrassing news from coming to light. The fact that the stakes are so much smaller in this case is what makes it so remarkable. It is not even arguably about life and death, but the stonewalling occurs anyway.
The holidays are coming and health care reform is dominating the news at the moment, so the FDIC's actions have been largely overlooked. Taken at face value it makes sense. The contemptible treatment of a FOIA request from a Seattle business publication does not by itself deserve screaming headlines or urgent attention. It does, however, highlight the continued trend by the federal government of a high handed stance towards us. There is an air of impunity about it, a sense that we deserve to be kept in the dark and cannot know what is being done in our names. Despite the change in party leadership in DC, it is not reversing or slowing down; it is in fact getting worse. And it is driven by a fundamental belief that people serve government, not the other way around.