Approximately two years have passed since Washington Mutual became the largest failed bank in the history of the U.S., triggering a surge in bank closures around the country that helped launch the nation into the financial crisis and recession.

The nation’s economy is still clawing uphill and unemployment is near 10%. This begs the question: What, if anything, has America learned in the past two years?

The WaMu Story

Washington Mutual was a massive financial institution before it went under. The bank carried assets of $307 billion, operated branches in 15 states and employed more than 40,000 people. Problem was, WaMu held a sizable chunk of sub-prime and adjustable-rate mortgages as assets.

When the real estate market tanked, WaMu took hits and eventually had its credit rating downgraded. In the nine days after its credit rating was downgraded, the bank’s customers withdrew nearly $17 billion in deposits. The en masse withdrawal by WaMu customers provided the government reason enough to seize the bank, despite the best efforts of WaMu’s executives. The Federal Deposit Insurance Corporation (FDIC) then sold most of WaMu to Chase Bank for just $1.9 billion. WaMu fought the takeover, claiming that it had a plan to raise the funds it needed without government intervention. To this day, WaMu still makes headlines. Chase is asking the government to cover the court costs it racked up after the acquisition of WaMu. Bank executives claimed Wall Street-headquartered institutions were favored by the government and given bailouts in favor of West coast-based WaMu.

WaMu’s downfall had a lot to do with the way it ran its day-to-day business. The bank set out to be the “Wal-Mart of Banks,” appealing to those who might not be creditworthy enough to receive service at other companies. This backfired in a big way when the sub-prime mortgage crisis — based on offering mortgages to underqualified homebuyers — hit and the real estate market sunk.

What Has Happened Since

The unhappy fate of Washington Mutual opened the failure floodgates. While the federal government extended taxpayer-funded bailouts to some of the country’s other largest banks, many mid-sized and small banks collapsed. In the final three months of 2008, 12 banks failed. That was nothing compared to what was about to happen to the nation’s banking industry.

The year of 2009 saw 140 FDIC-insured banks fail as the country pulled out of its recession during the summer and began to slowly recover. This year hasn’t been much more kind, as 127 banks have plunged into the hands of regulators through the first three-quarters of the calendar year.

It’s not clear if banks have learned from their mistakes — after all, the recession didn’t hurt the biggest banks that much. If anything progressive comes out of the financial crisis, it might be enhanced and more proactive laws created by the Dodd-Frank Wall Street Reform and Consumer Protection Act. The legislation, a package of laws passed this summer by the predominately Democratic U.S. Congress, is meant to add transparency to the banking industry. By passing the Dodd-Frank Act, along with the Credit Card Accountability, Responsibility and Disclosure (CARD) Act, the government is attempting to make the financial industry more safe for consumers to navigate. Whether banks have learned from the mistakes that ultimately doomed WaMu is uncertain, but the nation still feels the ramifications of the event today.

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