Mr Cooper Group Inc (COOP)

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con't part 2

When WaMu CEO Kerry Killinger asked Treasury Secretary Henry Paulson to use his influence to put WaMu on a list of protected stocks in July, Paulson told him, "You should have sold to JPMorgan Chase in the spring, and you should do so now. Things could get a lot more difficult for you," according to one of several current and former high-ranking WaMu executives who confirmed details of the call. (9)

In July of 2008, two months before the seizure Washington Mutual, Inc. was denied protection from illegal short-selling by the SECs naked short-sale ban that protected 19 financial institutions (eight of which were at Paulson's TARP meeting). Data through June 2008 shows that at one point that month "failures to deliver" (an indicator of illegal or naked short-selling) of Washington Mutual’s stock reached 9 million shares. From June 5 to June 19 there were, on any given day, at least 1 million WaMu shares that had "failed to deliver."

According to the OTS fact sheet released after the seizure, Washington Mutual was considered to meet OTS capitalization requirements and was in fact a solvent bank. In forward looking third quarter forecasts to the media, CEO Alan Fishman related that Washington Mutual, Inc. had access to over $50 billion in capital and enough liquidity to meet fixed obligations through 2010. According to some reports, the OTS seized Washington Mutual at the behest of the FDIC. The subsequent sale to JP Morgan Chase & Co. was conducted hastily on a Thursday evening, in a highly irregular auction that typically is designed to take place 180 to 360 days after seizure. The price paid was $1.88 Billion for a company with over $300 Billion in assets, over $20 Billion in book value, and over 2200 branches. It’s been recently published that the deal, by government estimates, gave Washington Mutual Bank and Washington Mutual Bank fsb assets to JP Morgan Chase for 1.5 cents on the dollar. (10)

While these revelations suggest that Washington Mutual, Inc. was not a failed institution, this notion is further supported by Kirsten Grind in her investigative article “Why Did They Close WaMu: Why did regulators abruptly close Washington Mutual when it had the cash to operate?”. Kirsten Grind indicates that she has internal documents showing that Washington Mutual had 29 billion dollars of net liquidity, was well above the OTS standards, and a source, an official who states, regulators “pulled the trigger too soon.” In addition, it’s been reported that John Reich, then head of the OTS, informed WaMu executives that JP Morgan Chase was in Washington lobbying regulators for the Washington Mutual purchase – since when is it acceptable for one private institution to lobby the Fed for the demise and purchase of another private institution? The ability to even attempt to lobby shows the improper connections that are in place between our regulators and “New York” banks.

All of this, and other articles that are beginning to surface support speculation that Washington Mutual was improperly seized, recent court filings in Federal District Court in Texas and U.S. Bankruptcy Court in Delaware suggest something more sinister. For example, the filing in U.S. Bankruptcy Court in Delaware, referring to a Texas State Court action - it is alleged that wrongful conduct of JP Morgan Chase & Co. includes:

(i) entering into false negotiations with the Washington Mutual, Inc. under the guise of a good-faith bidder during the summer of 2008;

(ii) gaining access to Washington Mutual's confidential and proprietary information through a variety of deceptive practices; and

(iii) disclosing Washington Mutual's confidential information as well as false information to the media and investors in an effort to drive down WMI's credit rating and stock price, cause depositors to withdraw deposits as a result of fear, and hamper efforts of Washington Mutual, Inc. to find a purchaser for itself.

The filing suggests that additional claims that could arise in the bankruptcy proceeding might include, without limitation, unfair competition, tortious interference, interference with prospective economic advantage, breach of contract, misappropriation of confidential information and trade secrets, and conversion. The filing further suggests that by way of these claims, JPMC may be held responsible for the destruction of Washington Mutual, Inc. and the total losses suffered by its creditors and shareholders. It’s been reported that on October 16, 2008, the JPMorgan team in a meeting with Washington Mutual counterparts in a private room at Purple, a swanky downtown Seattle wine bar sympathized, then made a jarring remark: “We were watching money “fly out of the bank,” from a “war room” at JPMorgan’s New York headquarters”, said one JPMorgan executive. Our question of course is: How is it possible for JP Morgan Chase to know the day-to-day financial operations of another private entity?

In addition, the underlying Texas action alleges that JP Morgan Chase & Co. used plants or moles (e.g., the Rotella allegations) inside of Washington Mutual, Inc. for the purposes of gaining insider information and exploiting that information for economic gain. Recent news reports have stated that in 2005, a small group of senior risk managers drew up a plan to limit risky lending practices, but a new executive team at the bank nixed the plan. Thus, it is conceivable that if the allegations of insider plants are true, these same plants could have knowingly undertaken or encouraged risky or fraudulent lending practices in an effort to destroy Washington Mutual's reputation and shareholder value.

Under Federal Rule of Civil Procedure 11(b), the above-identified filings are subject to the requirement of certification "that to the best of the person's knowledge, information, and belief, formed after an inquiry reasonable under the circumstances . . . ." Thus, whereas previous revelations in the news or government papers regarding Washington Mutual's situation might command a relatively lower level of trust, the allegations in the above-identified filings demand the additional respect that the Federal Rules of Civil Procedure are designed to command.

WMI nor WaMu never received a letter from the OTS to raise additional capital, in fact the OTS, even when placing WaMu into the hands of the FDIC, even stated that WaMu was well capitalized but stated that WaMu was “systemically risky” and that’s why it was placed into receivership. Also, there was a Memorandum of Understanding (NASDAQ:MOU) active and in-place between WMI and the OTS.

Worth pointing and repeating: The OTS said WaMu was "systemically risky" while Mr. Paulson did not add WaMu to the "Do Not Short List" which included 19 institutions Mr. Paulson considered "systemically important" - Which was it? Was WaMu systemically important or not? Within the tiniest of timeframes - the Office of Thrift Supervision, named the FDIC as receiver of the whole bank of WaMu and sold it to JPM within hours for 1.888 Billion. It’s absolutely amazing the timing behind the receivership and it’s even more amazing the ability of JPM to be right there, ready with slides and research, ready to make an offer that conformed to the FDIC’s requirements, ready to provide a winning bid with no negotiations. It’s been further revealed that while the FDIC claims there were multiple bids and JP Morgan had the only conforming bid – James Dimon, JPM CEO, stated in during a Seattle speech that “The dirty little secret was, JPM was only the bidder and could have got the whole company for $1". Again, an example of the inconsistencies in comments about the deals details between the FDIC and JP Morgan Chase. (11)

Even more amazing than the receivership’s timing was JPM's incredible fortune-to be at the ready with bid in hand. JPM managed to navigate the moral hazard involved in participation in a limited auction and low-ball bid for a coveted rival with nary a whisper of populist rage is either a testament to the chaos of the period or the desensitized nature of the common citizen and all of this was done within hours...

http://seekingalpha.com/instablog/415296-truth-and-transparency/41647-open-letter-to-the-financial-crisis-inquiry-commission-and-permanent-subcommittee-of-investigations