JP Morgan Buys WAMU - Examiner Says "No Bad Faith" - But Something Still Smells

JPMorgan’s purchase of WAMU must be seen through the lens of the financial crisis of September, 2008. That’s the conclusion of official examiner, Joshua Hochberg.

The Deal

Dan Fitzpatrick at the Wall Street Journal (click here for the article) reports that the FDIC called JP Morgan with an offer to sell WAMU six days before it even received the failed bank. That’s a problem, did they call Wells Fargo or a small but robust regional bank, or what about a … a European giant (get the bidding going)? No JPMorgan’s Chief Executive, James Dimon, got himself an exclusive. And what does he say: I’ll think about it; we “might be willing” to purchase WAMU. Wouldn’t want to play poker with this guy; no doubt he is brutal – beware the check raise. Three days later, JP Morgan – perhaps knowing it has an exclusive drives a hard bargain: it won’t buy WAMU whole, but would certainly purchase the bank out of receivership.

Now here’s the really outrageous part: over the following days, JPMorgan and the FDIC negotiated the terms of the WAMU purchase despite the FDIC’s claims to other banks that terms were non-negotiable. On September 26, 2008, JPMorgan purchased Washington Mutual’s $188 billion in deposits and a coast-to-coast presence from the FDIC for $1.8 billion AND SIX PAGES OF INDEMNIFICATION RIGHTS AGAINST FUTURE LIABILITIES AND LOSSES.

Official Examiner Joshua Hochberg has found no signs of dealing in bad faith. Come on Josh.

Instead of handing WAMU over to JPMorgan on a silver platter, the FDIC should have run a real auction and forced JPMorgan to compete. Yes compete; against other banks in good faith.

Tough to understand the FDIC’s decision – particularly from an agency with a good reputation and a cadre of very experienced and sophisticated staffers.

This should not be swept under the rug. Investors, consumers and competitive banks deserve better.

Assisted by Zach Kady

paul cox

If the Washington Mutual crisis had not been created by the FDIC, in September of 2008, congress would not have passed the $700 billion rescue fund, called TARP It was a classic Problem Reaction Solution Paradigm 1) The government creates or exploits a problem blaming it on others 2) The people react by asking the government for help willing to give up their rights 3) The government offers the solution that was planned long before the crisis After TARP the government seized new powers over the economy. It dramatically expanded the regulatory powers of the Federal Reserve and injected a trillion dollars of inflationary credit into the banking system. It partially nationalized the biggest banks. It appropriated $700bn with which to intervene in the economy. It made General Motors and Chrysler wards of the federal government. It wrote a bail-out bill giving the secretary of the treasury extraordinary powers that could not be reviewed by courts or other government agencies.” Was this a conspiracy put in motion by the elites? I don’t know, but a lot of fingers sure point in that direction. “The liberty of a democracy is not safe if the people tolerate the growth of private power to a point where it comes stronger than their democratic state itself. That, in its essence, is fascism – ownership of government by an individual, by a group,” Franklin D. Roosevelt quote
kiels

unbelievable!
That was a steal.
roman

seems like the whole thing is crooked to the core
i am going to submit your article to the judge
Paul Cox

If the Washington Mutual crisis had not been created by the FDIC, in September of 2008, congress would not have passed the $700 billion rescue fund, called TARP It was a classic Problem Reaction Solution Paradigm 1) The government creates or exploits a problem blaming it on others 2) The people react by asking the government for help willing to give up their rights 3) The government offers the solution that was planned long before the crisis After TARP the government seized new powers over the economy. It dramatically expanded the regulatory powers of the Federal Reserve and injected a trillion dollars of inflationary credit into the banking system. It partially nationalized the biggest banks. It appropriated $700bn with which to intervene in the economy. It made General Motors and Chrysler wards of the federal government. It wrote a bail-out bill giving the secretary of the treasury extraordinary powers that could not be reviewed by courts or other government agencies.” Was this a conspiracy put in motion by the elites? I don’t know, but a lot of fingers sure point in that direction. “The liberty of a democracy is not safe if the people tolerate the growth of private power to a point where it comes stronger than their democratic state itself. That, in its essence, is fascism – ownership of government by an individual, by a group,” Franklin D. Roosevelt
charles

Thank You. It’s about time someone told it like it is! If regular everyday people only knew half of the Wamu story they’d be shocked. Not only about how Wamu was STOLEN but how corrupt this BK case has been. I hope to read more articles from you on this in the near future. Hard to believe Mr. Hochberg found no signs of bad faith dealing in a deal that was NOTHING BUT SCANDALOUS. It’s also hard to believe that after 2 years in bankruptcy no asset list of what was seized has been disclosed (Mr. Hochberg “did’nt have the time” to try to obtain an asset list I guess). Wamu shareholders deserve to walk away from this BK case with a fair deal but it is looking more and more like the deck has been stacked against them. The rich win again.
much.faster

mr. berk, you wrote:
“Now here’s the really outrageous part: over the following days, JPMorgan and the FDIC negotiated the terms of the WAMU purchase despite the FDIC’s claims to other banks that terms were non-negotiable.”
as a wmi shareholder, who wants justice, i need a confirmation of this sentence. if you could afford some time, write me a mail. and if you have a second source for this one:
“Dan Fitzpatrick at the Wall Street Journal (click here for the article) reports that the FDIC called JP Morgan with an offer to sell WAMU six days before it even received the failed bank.”
i would also be glad. i`m not sure, if the mail connection works (:-))), so maybe you could post it as asafety on your comment part
thanks in addvance, sincerly yours much.faster
Joseph McCluskey

Comment? Comment! I live in Seattle and watched daily as this banking seizure and sale occurred as though it was a car crash in front of my home. I have watched and read almost daily to see what managers or WAMU, the FDIC, and JP Morgan Chase were going to do. Now, I see that collectively they are inept and unable to produce a just resolution. The entrenched lawyers leaning on the corporate pocket book have simply lost credibility and the bankruptcy court is about to do the same. Shame on Democracy, shame on “free market capitalism”, shame on Wall Street and the U.S. Tax Payer/ Citizen. No one wins and everyone looses but the lawyers who get paid big. And, they have sacrificed a piece of their goodness to take this money. On the other hand, all assets could be accounted for and liquidated properly and the proceeds divided equitably.
fixedops

Finally an article that is not afraid to speak the truth. Ideed there is a huge stench in this dibacle.
I really hate to be one that screams conspiracy but, after following this for two years and doing extensive DD thats exactly what it looks like. Are people at the highest levels being bought out or promised higher ranks or even threatened? I certainly hope not but, I think of any other explaination.
Put JPM and the FDIC aside for a moment and focus on WMI. Where are WMI’s assets? They are a holding compamy for crying out load. WMB was just one of many assets yet nobody has come up with that list of assets and worse, nobody has asked or pushed the matter.
kudos to
Steven Berk and
Zach Kady
May the big powers never sway you.
Thomas Whitridge

You are absolutely correct that this smells and we all deserve much better.
Debtor’s attorneys, Weil Gotshal and Quin Emanuel, have totally shirked their fiduciary responsibility to equity, Hochberg’s “report” amounts to a shameful rubber stamping of the JPM/FDIC/Debtor position and the rulings of Judge Mary Walrath have been totally biased against shareholders.
This is a case to watch very carefully as I believe it manifests corruption now approaching all new, historic proportions. JPM has been very successful in preventing the media from shining a disinfecting light on the truth of how it came to own WMB and how it is presently attempting to retain all of the wealth of retail shareholders by controlling legal proceedings.
Please keep reporting it as you see it.
Thank you.
Gunther

The whole World is looking to the USA and this Case. Many People thought USA have a functional Justice but in the Moment many, many, many People don`t think so.
Many People look what will be the Result of this Case and than they decide if the will invest in future in the USA or not.
And i think the same. No, this Case did not smell. It stinks!