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The WaMu tragedy as a lesson in sustainability

The economic crisis is about "lots now" when it should be "some forever."
The Seattle Art Museum, with its 'Hammering Man' sculpture, adjoins the 42-story office tower built by now-defunct WaMu bank.

The Seattle Art Museum, with its 'Hammering Man' sculpture, adjoins the 42-story office tower built by now-defunct WaMu bank. Chuck Taylor

Washington Mutual's shiny new skyscraper dominates the view from my office; to me at least, the echoes of Ozymandias are clearly audible: "Look on my works, ye mighty, and despair."

WaMu, seized by bank regulators before it could go bankrupt, had saddled itself with tens of billions of dollars of bad mortgage loans. But WaMu was, just a few years ago, a proud hero of the financial industry. In 2006, I spent two weeks at Stanford Graduate School of Business, where a professor assigned my class of non-profit leaders to analyze WaMu as a case study of innovative business practices. The professor lauded WaMu's mold-breaking techniques for extending credit to high-risk borrowers. What looked innovative then looks reckless now. Still, whatever its failings, WaMu was a dynamic institution filled with whip-smart northwesterners who mostly excelled at their jobs.

The problem, to employ a church metaphor, wasn't bad preaching, it was bad theology — the theology, in the words of Oregon forester Roy Keene, of "lots now." Like the rest of the financial crisis, the mechanisms and particulars of WaMu's fall are opaque to me. But the fundamental principle is achingly familiar: The financial crisis is a sustainability crisis. Sustainability, at base, means "living within our means." It means, in Keene's words, not lots now but "some forever."

The U.S. financial industry, in tandem with the real-estate industry, has apparently been flouting that principle and encouraging its customers to do the same for a good many years. Mortgage lenders like WaMu lent unsupportable amounts of money to would-be homebuyers. Recently, The New York Times did an insightful case study of how this reckless strategy took hold at once-cautious Fannie Mae.

If we are honest with ourselves, many of us will have to admit that it's not just the mortgage-home-buying bubble of the last five years. In Cascadia, as throughout North America, living beyond our means is commonplace. Some of us, cornered by circumstances, have accumulated debt during a period of unemployment or a spell without medical insurance. Others of us, swept up in the optimism that pervades most bubble economies, have run up personal debt on credit cards or home equity lines and counted on future earnings or the continuation of stock-market gains to pay the tab.

Just so, as a nation, the United States is addicted to living beyond the means of its treasury: For eight years, we've raised federal spending while cutting taxes. The predictable results have been massive federal deficits and a truly colossal national debt.

Finally, we live beyond the means of our natural heritage as well. In fact, we have been spending the natural capital on which all life depends as if our planet were a business in liquidation. This week's heart-rending installment in the ceaseless litany of evidence: a new study suggests one-fourth of mammal species worldwide face extinction unless we humans change our ways.

The moral of the economic-crisis story, like that of the ecological one, could not be clearer: We have to live within our means, personal, national, and planetary. "Lots now" must give way to "some forever."

Fortunately, "some" can still be "enough." It can even be "plenty." The potential for a super-efficient, climate-safe Northwest energy economy is ample. We can have it, plus all the shared prosperity and security it promises, if we act together.

The key is to harness human ingenuity to these tasks. I'm imagining skyscrapers as imposing as WaMu's full of whip-smart northwesterners all hustling not to further stretch the normal principles of mortgage lending but to plan and implement the transition to a healthy, lasting prosperity. We need bold, bright, and committed professionals to operate a regional auctioned cap-and-trade system, to plan and administer innovative conservation loans, to start legions of new clean-tech businesses, to plan and build (or rebuild) scores of compact, walkable communities, to design and construct world-leading transit and energy systems, and to train a new generation of green-collar technicians and tradespeople.


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Comments:

Posted Tue, Oct 14, 6:07 p.m. Inappropriate


I think not. I think Wamu was and is still a hero.

The reason is that most of us are not wasting the planet.

Most of us, even a middle class person, uses up very, very little energy, resources and so on.

This is a world where 3 percent of the people control 84 percent of the wealth.

This is a country where 66 million acres out of 1.9 billion represent the homes of 75 percent of the population.

What Wall Street and Wamu did was stretch every dollar to make loans so that the poor could afford a house.

The real problem though, was that 30 years of skinflint monetary policies by the Fed left banks with not enough money to lend...hence the arcane subprime loans.

It's the same thing that caused the "Tech Bubble". Was the bubble wrong? I look back on many of those Internet companies and while today people tut-tut about how ridiculous they are -- to me, they sort of made sense. I think many were good ideas...however, just when more capital was needed, Alan Greenspan raised rates and investors pulled back.

Another drag on innovation has been the general high cost of living. Housing has been always out of reach ever since I entered the workforce in 1982. So, an Internet business that needed labor (like some of the bicycle delivery services) had to account for people needing to pay thousands in rent. When it comes to basic living, it's not been high health costs -- it's just the basic high cost of putting a roof over one's head!

I think what his happening now may be the greatest chance in 3 decades for the average person to finally be capitalized and paid justly so that he can live well. I salute Wamu and the Wall Street bankers who tried to take one buck, and make it into ten. Of course, it couldn't last. But...they tried.

jabailo

Posted Tue, Oct 14, 11:25 p.m. Inappropriate


jabailo, you are joking, right ? ? ?

perhaps you can explain what has happened to the "sense of personal responsibility" in the US ?

Because some entity offers you a 'loan' that seems almost too good to be true AND asks you to verify little about your ability to be a responsible borrower, its still OK to assume a debt you can not repay ? !

So, now the US has become a country where all people are owed everything, without having to assume responsibility for anything ?

Can't afford to have a child, NO PROB, go ahead, the government, local, state or fed will become the surrogate "parent" and pay for your mistake !

Can't afford a house ? No prob, take out a loan anyway, let someone else bail you out !

You seattle liberals really crack me up ! I'm waiting for the day you take your check books out and start paying these "bills" !

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