Offering frequent news and analysis from the majestic Evergreen State and beyond, The Cascadia Advocate is the Northwest Progressive Institute's unconventional perspective on world, national, and local politics.

Saturday, March 21, 2009

Washington Mutual files suit against FDIC, alleges deal with Chase violated its rights

The WaMu saga isn't over yet, folks:
Washington Mutual Inc, the failed U.S. savings and loan, has sued the Federal Deposit Insurance Corp for well over $13 billion in connection with the loss of its banking operations, which was acquired by JPMorgan Chase & Co.

In a complaint filed with the U.S. District Court for the District of Columbia, the thrift's former parent accused the FDIC of having on January 23 made a "cryptic disallowance" of its claims, prompting the lawsuit.

It also accused the FDIC of agreeing to an unreasonably low price in arranging the a $1.9 billion sale of the banking business to JPMorgan on September 25, when regulators seized Washington Mutual and appointed the FDIC as receiver.
We've always thought that the WaMu seizure and sale to JPMorgan Chase seemed unusual, especially considering the ridiculously low price that Chase paid.

The people running what's left of Washington Mutual (the holding company) clearly feel that they've been ripped off. They're demanding a jury trial to weigh their allegations against the Federal Deposit Insurance Corporation.

The complaint's Prayer for Relief (in other words, what Washington Mutual is asking the District Court to do) is as follows:
WHEREFORE, Plaintiffs respectfully request the Court to grant the following relief:
  1. An order declaring Plaintiffs' Claims to be valid and proven against the Receivership;
  2. An order directing FDIC-Receiver to pay the Claims from the assets of the Receivership in accordance with 12 U.S.C. 1821(d)11);
  3. An order directing FDIC-Receiver to provide Plaintiffs with an accounting of all property transferred from Plaintiffs in connection with the Receivership,
  4. An order directing FDIC-Receiver to provide Plaintiffs with an accounting of the disposition of the assets of the Receivership if any Claim is not satisfied in full;
  5. Enter a judgment against FDIC-Corporate and FDIC-Receiver for damages, in an amount to be determined, equal to the amount of money Plaintiffs would have received in a straight liquidation of WMB's [Washington Mutual Bank's] assets and liabilities less any amounts actually received from the Receivership;
  6. Enter a judgment against FDIC-Corporate and FDIC-Receiver for damages, in an amount to be determined, equal to the values of Plaintiffs' property converted by the FDIC;
  7. An order declaring that the FDIC's January 23, 2009 disallowance to be void, and that the parties should proceed as if such disallowance never occured;
  8. Award Plaintiffs costs and attorneys fees as may be permitted by law; and
  9. Award Plaintiffs such other relief as may be just.
The entire complaint is available from our document vault.

My favorite part of the complaint is Count III: Taking of Plaintiffs' Property Without Just Compensation, which reads:
91. Plaintiffs incorporate the allegations and averments contained in paragraphs 5 through 90 as if set forth fully herein.

92. The FDIC's wasting of WMB's [Washington Mutual Bank's] assets and failure to compensate Plaintiffs for their claims against WMB equivalent to what Plaintiffs would have received for such claims in a straight liquidation of WMB's assets constitutes a taking of Plaintiffs' property without just compensation in violation of the Fifth Amendment to the United States Constitution.
It'll be interesting to see what happens to this lawsuit. We'll try to keep you posted on any further developments. The case is Washington Mutual Inc v. Federal Deposit Insurance Corp, No. 09-00533, District Court for the District of Columbia.


Blogger gman said...

You were very astute in gleening some very significant charges in the lawsuit. There are so many other issues that border on being criminal, but will only mention a few. 1. What right did the FDIC have to undermine WMI's ability to sell itself. WAMU was seized at end of day on 9/25. We have documentation and statements from JP Morgan conference calls that they were notified by the FDIC on 9/19 a Friday. This was before the bank was seized on 9/25. 2. OTS letter of seizure issued on 9/25 states that WAMU was well capitalized on day of seizure. They stated that WAMU may be insolvent due to the run that occurred from 9/15-9/25. The key word is may. Important point to note, were they ever issued a letter to inject liquidity, the answer is No. They violated their own guidelines. 3. If they are using the reason that a run had occurred between 9/15-9/25, then why was FDIC contacting possible acquirers on 9/19. It smells rotten. Did you ever see lines at the bank? They claim that it was all done electronically. 4. Indymac was sold for 14 Billion and WAMU for only 1.9 Billion. Please look at the size comparison in deposits, assets and branches. It proves your point listed above. 5. Stewart Landenfield filed an affidivit in BK court that up to the seizure, WAMU was still able to borrow from the discount window of the Federal reserve Bank of San Francisco. OTS and FDIC jumped the gun illegally.

There is so much fraud and contradicting statements, it will all come out in court. Lastly, if you listen to JP Morgans 3rd Quarter Conference will see how they benefited from this transaction. Have an accountant go over this and translate for you. They also admitted, they would benefit tremendously from the WAMU transaction for years to come. Thank you for being so astute. If further info is needed, please visit this website.

March 23, 2009 2:47 PM  
Blogger HROLLER said...

March 23, 2009 3:42 PM  
Blogger Victor said...

while i would not usually read liberal paper/blog, being a libertarian, this is by far the best article on the WaMu lawsuit that is available there on the net outside of wamu-shareholders sponsored sites. Congratulations! Respect! Gratitude!

March 23, 2009 8:33 PM  

Post a Comment

<< Home