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(LATimes.com) — Before Washington Mutual collapsed in the largest bank failure in U.S. history, its executives knowingly created a “mortgage time bomb” by making subprime loans they knew were likely to go bad and then packaging them into risky securities, a congressional investigation has found.

In some cases, the bank took loans in which it had discovered fraudulent activity — such as misstated income by borrowers — and rolled them into mortgage securities sold to investors without disclosing the fraud, according to the report released Monday by the Senate’s Permanent Subcommittee on Investigations.

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