The Reckoning – WaMu Built an Empire on Bad Loans – Series – NYTimes.com:
“SAN DIEGO — As a supervisor at a Washington Mutual mortgage processing center, John D. Parsons was accustomed to seeing baby sitters claiming salaries worthy of college presidents, and schoolteachers with incomes rivaling stockbrokers’. He rarely questioned them. A real estate frenzy was under way and WaMu, as his bank was known, was all about saying yes.

Yet even by WaMu’s relaxed standards, one mortgage four years ago raised eyebrows. The borrower was claiming a six-figure income and an unusual profession: mariachi singer.

Mr. Parsons could not verify the singer’s income, so he had him photographed in front of his home dressed in his mariachi outfit. The photo went into a WaMu file. Approved.”

“It was just disheartening,” said Sherri Zaback, a mortgage screener for Washington Mutual. “Just spit it out and get it done. That’s they wanted us to do. Garbage in, garbage out.”

Over the Christmas holiday my dad told me stories from decades ago of Mississippi farmers moving to Michigan to get jobs in the auto industry. The agriculture industry still remained, but many moved to Michigan pursuing good jobs and opportunity. Large auto companies were booming there, and the workers went to where the work was located. Success in the US comes not from our ability to keep things the same. Our legacy of success comes from our ability to change.

The American economy is the story of inventing the new thing, growing the new thing, maintaining it, and letting it die. In our rush to prop up and re-organize current valuable industries, let’s not forget to make sure we keep a free and open society and a infrastructure that facilitates the creation of what is next. The next big industries are small now. Some of the next big companies are on the back of napkins right now. So, what’s next?

Greg Mankiw’s Blog:
“The above figure (reprinted from my favorite textbook) shows government revenue as a percent of GDP. The most noteworthy feature of these data is the substantial growth of government from 1929 to 1945. It is easy to understand why the size of government grew so much during this period: The nation was responding to the crises of the Great Depression and, especially, World War II. But what is noteworthy is that while these crises were transitory, the increase in the scope of government was permanent.”