Let’s look at some of the details of JPMorgan’s acquisition of Washington Mutual from the FDIC. Warning: these new details may not be safe for children.
JPMorgan’s Purchase and Assumption Agreement dated September 25, 2008, contains a SIX PAGE INDEMNIFICATION SECTION. Indemnification shifts the risk. Guess who the risk was shifted to? Yep, the good old FDIC. They agreed to indemnify JPMorgan against virtually all risk involved with the deal.
Click here to read the entire Purchase and Asset agreement. For example on page 24 the FDIC promises to insure JPMorgan against practically all liabilities resulting from any WAMU misconduct…even costs for attorney’s fees. And don’t think for a moment JP Morgan is ignoring those provisions. As investors clamor for justice, JPMorgan hides behind the FDIC’s FIRREA process while asking for billions of additional funds under the indemnification agreements (click here for a recent WSJ article on the subject). Is it too much to ask for JPMorgan to take responsibility; to take the good with the bad? Instead they appear to be gaming the system.
Franklin Roosevelt stated,
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
While Mr. Hochberg has claimed no “bad faith” he has not claimed “justice”. The WAMU stakeholder deserve justice, not a back alley deal designed to benefit one entity – JP Morgan – to to the detriment of all others.
Assisted by Zach Kady