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Explain to yourself why the fdic-r is not released .
There is no need for a lawsuit and there will be no lawsuits ever.. A wamu lawsuit would indeed bancrupt jpm and with the us financial system .... Hint: rico . 600 billion . No way they will risk a wamu lawsuit .
And i bet on it that jpm already paid book value for the assets they got and it sits off the books at the fdic-r til the deutsche bank lawsuit is over . "Jpm to shed 100 b $ because of new regulations " ... + 165 billion in wamu assets in jpms 10 k .
Funny that there are no new regulations for all the other banks . I tried to find info about these new regulations but couldnt find them anywhere. They made it up to explain it to their shareholders.
If you still believe it is not crazy to think that a non bancrupt 300 billion was sold dor less then 1% ... Do it .
I find it crazy that there a still investors here that claim 100 billion coming back is totally out of reach .
Even more when it comes from people who seem to have no interest in a positive outcome for their life decisions .
Even more funny if one considers that nobody here will change the outcome of the mediated results ofthe por7.
Jpm has to pay book value for the wamu assets they have ... All the assets of wmi have to come back anyway on top of that . Wmi itself was never bancrupt.
I seriously expect a return of 24-160 billion anytime til 2018.
When i did my first investment in wamu i expected 5-10 leftovers but then i did a lot of dd realized how frekin big this wamu mess is . 24 billion is as lowball as lowballs can be low .
160 billion is what i call fair and reasonable .
Ots says wmbfsb was a indirect wmi sub :
Prior to September 26, 2008 (the “Petition Date”), WMI was a multiple savings and loan holding company that owned Washington Mutual Bank (“WMB”) and, indirectly, WMB’s subsidiaries, including Washington Mutual Bank fsb (“FSB”). As of the Petition Date, WMI also owned, directly or indirectly, several non-banking, non-debtor subsidiaries. Prior to the Petition Date, WMI was subject to regulation and examination by the Office of Thrift Supervision (the “OTS”). WMB and FSB, in turn, as depository institutions with federal thrift charters, were subject to regulation and examination by the OTS. In addition, WMI’s banking and non-banking subsidiaries were overseen by various federal and state authorities, including the Federal Deposit Insurance Corporation (“FDIC”).
----------------------
Conclusion for me is that all of wmbfsb assets are still owned by the wamu investors or jpm has to pay for all of that to us . Imho the problem is that the fdic could have never seized and sold wmbfsb assets but they cant undo it ... We will see how they fix it as they are very motivated because fdic-r never got released by us .
This story is over when escrows are either paid ltis or gone . I wonder why they are still in our depots .
The most logical conclusion is of of course : there is really , really nothing to see here . Ever . Period . Rofl .
http://www.sec.gov/Archives/edgar/data/933136/000119312513435176/R7.htm
Also a good general info about wmih
Bkshadowy would you please explain to us why the fdic-r is still not released as part of the por7 ?
If there is absolutely nothing to see here why is the fdic not able to verify what jpm bought fot their 1.888 b initial payment ?
If this mess contains nothing for us why do i still have all escrows after our very last wmih distribution ?
Why cant they just remove them forever ?
It would be all over in second if they could do that but somehow this story seems not yet at its last chapter ...
Is it that maybe jpm did not buy any wmi assets at all and 24 b minimum has to get back to original investors ?
Why said the fdic that the payment of 1.888 b was just an initial payment for the deposit and how can one misread initial payment into final and full payment ?
If you can show us a single document that says in black and white if and what jpm baught for a "final" payment of 1.888 b ... That would be really enlightening . Thanks in advance .
If 1.888 is the initial then i would like to see the final payment of ... Lets say 127 b .
127b sound almost fair and reasonable .
Or is it snother scrivenerserror ? ;)
Fdic rule 360.6 / safe harbour
Here you can find out about the :
RESOLUTION AND RECEIVERSHIP RULES
https://www.fdic.gov/regulations/laws/rules/2000-7800.html#fdic2000part360.6
360.6 had a little "modification" in 2010 :
http://www.structuredfinanceinsights.com/resources-20.html
You can find some other interesting reads on this site about the topic .
FDIC Safe Harbor Rule
FDIC Safe Harbor Rule
On September 27, 2010, the Federal Deposit Insurance Corporation (the "FDIC") adopted a final rule amending the safe harbor for insured U.S. depository institutions (each, an "IDI") regarding the treatment by the FDIC, as receiver or conservator, of financial assets transferred by an IDI in connection with a securitization or in the form of a participation (the "Safe Harbor Rule"). The Safe Harbor Rule is codified at 12 CFR § 360.6, where is replaced the FDIC’s original safe harbor rule that had been adopted in 2000 (the “Original Rule”), as modified by certain interim actions by the FDIC which established transitional periods for securitizations and participations completed or in process, first to March 31, 2010, then to September 30, 2010, and finally to December 31, 2010 pursuant to the Safe Harbor Rule.
The Original Rule was intended to resolve issues raised by Financial Accounting Standards Board (“FASB”) Statement No. 125 (“SFAS 125”), which was shortly replaced by Statement No. 140 (“SFAS 140”) (a replacement of FASB Statement 125). Under SFAS 140, a transfer of financial assets was accounted for as a sale if the transferor surrendered control over the assets. One of the conditions for determining whether the transferor had surrendered control was that the assets had been isolated from the transferor (i.e., put presumptively beyond the reach of the transferor and its creditors in bankruptcy or receivership), known as the “legal isolation” condition.
The Original Rule provided that, subject to certain conditions, the FDIC would not, by exercise of its authority to disaffirm or repudiate contracts, reclaim, recover, or recharacterize as property of an IDI or the receivership of any assets transferred by the IDI in connection with a securitization or participation, provided that such transfer met all conditions for sale accounting treatment under generally accepted accounting principles (“GAAP”), other than the legal isolation condition as it applies to institutions for which the FDIC may be appointed conservator or receiver, which was addressed by the Original Rule.
In 2009 FASB adopted Statement No. 166 (“SFAS 166”) (an amendment of FASB Statement No. 140) and Statement No. 167 (“SFAS 167”), each of which is applicable to reporting periods that began on or after November 15, 2009. Under SFAS 166 and SFAS 167, many securitizations no longer qualified for sale treatment under GAAP and, as a result, no longer qualified under the safe harbor of the Original Rule.
In order to address the changes in GAAP, and to also subject the availability of the new safe harbors to more stringent conditions based on the FDIC’s belief that deficiencies in securitization practices led to many of the losses during the financial crisis which in turn led to claims upon the Depositor Insurance Fund administered by the FDIC, the FDIC Safe Harbor Rule provides four safe harbors for “legal isolation.”
I wonder why they changed this particular matter in 2010 ...
Why is the fdic-r not released again ?
Was it done to ensure that billions in safe harbour operations that belong to the wmi estate find their way back into escrow/lti accounts ?
Hint:
The tale of missing exhibit "z"
Chapter 1 :
An investor asked :
One question for anyone who might know. From the second GSA, we have this section which refers to "Exhibit Z".
Have we ever seen what this exhibit contains? I don't recall ever seeing it, nor can I find it.
https://www.fdic.gov/bank/individual/failed/...ttlement_agreement.pdf
Section 2.19. Loan Servicing. From and after the Effective Date, JPMC shall (a) cause such of its Affiliates to continue to service the loans identified on Exhibit “Z” hereto (the “Loans”) pursuant to the servicing agreements identified on Exhibit “AA” hereto (the “Servicing Agreements”), (b) cause such of its Affiliates to remit to WMI all checks and/or payments received in connection with those loans in its possession and (c) promptly (i) remit to WMI all servicing advances that JPMC is holding with respect to such loans and (ii) provide WMI an accounting with respect to each of the foregoing. Notwithstanding the foregoing, any dispute that may arise relating to the servicing of such loans during the period from and after the Effective Date shall be brought pursuant to such servicing agreements and this Agreement is not intended to create any additional rights, obligations or remedies. The Parties acknowledge and agree that (y) the Loans are the only loans that are or will be, from and after the Effective Date, serviced by the JPMC Entities (or their Affiliates) for the WMI Entities (or their Affiliates or their successors in interest) and that the Service Agreements are the only servicing agreements between the JPMC Entities (or their Affiliates) and the WMI Entities (or their Affiliates) and (z) with the exception of the obligations set forth in this Section 2.19, the JPMC Entities (and their Affiliates) shall have no further obligations or liability to any of the WMI Entities (or their Affiliates) with respect to or in any way related to the servicing of any loans for the WMI Entities (or their Affiliates).
Chapter 2 :
Another investor answered :
The key point is 510(b).
510(b) is an over-funded Claim. More money in the pot, than claims against the pot of goods.
Tranquility Master Fund
Motion of the Official Committee of Unsecured Creditors to Alter or Amend the Court’s Opinion and Order Regarding Subordination of the Claim of Tranquility Master Fund, Ltd. [Docket No. 9301; filed 1/3/12]
Court Docket: #9301
Document Name: Motion of the Official Committee of Unsecured Creditors to Alter or Amend the Court's Opinion and Order Regarding Subordination of the Claim of Tranquility Master Fund, Ltd.
Date Filed: 1/3/2012
http://www.kccllc.net/wamu/document/0812229120103000000000017
“Here, although the Trusts were “issuing entities,” they were not the “issuers” of the securities as a matter of law. The “issuers” were the depositors, WaMu Asset Acceptance Corp. (“WAAC”) and Washington Mutual Mortgage Securities Corp. (“WMMSC”), both wholly-owned subsidiaries of Washington Mutual Bank (“WMB”). Accordingly, the “issuers” of the securities were indeed affiliates of the Debtors. The correction of this error of law will lead to the proper subordination of Tranquility’s claim.”
RELIEF REQUESTED
9.
The Committee seeks to alter or amend that portion of the Court’s Opinion and Order in which the Court ruled that the Debtors have not stated a basis for subordination of the Claim. The Committee requests entry of an order finding that WAAC and WMMSC were the issuers of the Certificates, and that because WAAC and WMMSC were affiliates of the Debtors under section 101(2)(B) of the Bankruptcy Code, section 510(b) applies to subordinate the Claim.
JPM's R-203 OBS is WAAC and WMMSC. The affiliates of the Debtors [WMI and WMIIC].
Therefore, 510(b) is R-203.
$78B repaid.
$48B liquidated.
$38B remain.
"JPM to shed $100B in customers deposits".
Get it ?
My idea for chapter 3 gets away from written content and it goes a little like this :
Witzcatz can you please show us documented proof that justicewillwins and others interpretation of the washington mutual bancruptcy proceedings does not apply ?
Documents seem to show that the on top of the 1.888 initial payment a final and full payment for all sold assets has do be made at full book value.
Please provide us with documented proof that this is not the case .
A minimum of 24 billion plus interest has to be paid til 2018 on top of the initial 1.888 b . All imho based on documented proof .
You asked about value ?
Here you go :
What Did JPM Gain in the purchase of WAMU bank and subsidiaries?
JPM had long coveted WaMu's West coast branch network, and had earlier offered $8 per common share for the entire company, an offer that would have assumed all debt and preferred stock of both WMB and WMI. It was rebuffed at the time for making a “lowball” offer; it was less than WMI common stock's market price at that time.
Through the seizure and acquisition, JPM expanded its' banking footprint into states with little Chase coverage. These include Washington, Oregon, California, and Florida. Along with $307B in assets they acquired $188B in deposits, 2239 branches, 4,932 owned and branded ATMs, and 43,198 employees.
They were also given the ability to return any branches they didn't want to the FDIC. JPM has indicated it would lay off 9200 employees and recently indicated they would cut another 2800 positions through attrition; the cuts total nearly 30% of WaMu's employees. Included in the purchase price was $1.5B of real estate or other assets (JPM's 10K, 12/31/08, p 82) and WMB's credit card business. Listed figures are as of 06/30/08 as stated in the OTS fact sheet below.
http://files.ots.treas.gov/73002.pdf
WMB's credit card business had been expanded on June 6, 2005 with the purchase of Providian Financial for $6.45B. JPM assumed both the WMB and Providian credit card subsidiaries along with all other subsidiaries of the bank. $10.6 Billion in credit card receivables were included.
http://en.wikipedia.org/wiki/Providian
JPM's Loan Portfolio
JPM stated in their conference call on 09/25/08 that the transaction would be, "Accretive immediately, 50 cents" (per share), and that it would result in a "Net cost savings (of) $1.5B, conservatively." "$176B (of) home loans (were) assumed", with "$30.7B losses projected."
http://wamucoup.com/JPM_telecon_all.wma
"Just shy of $300B of assets" were assumed, with net assets of $31B after deducting liabilities. JPM then stated they would mark down $31B related to the loans. Coincidence? JPM can use those write downs to offset $31B in profits, resulting in a significant tax savings. At a 35% tax rate, this represents a tax savings of $10.85 Billion.
When asked about loan losses if the economy were to worsen, JPM stated that even under the pessimistic assumption if the loan losses exceeded expectations, the worst they would do would be to end up flat. Why? Because the other WMB assets would still be making money. JPM stated, "This transaction's generating $12B of capital over the next 3 years.” (That is after taxes.) WMB's acquisition would result in, a "stable, predictable earnings stream" due to retail customers.
An interesting quote from the 8-K filing on 01/15/09:
-- Exhibit 99.2, EARNINGS RELEASE FINANCIAL SUPPLEMENT, FOURTH QUARTER 2008, page 4, CONSOLIDATED FINANCIAL HIGHLIGHTS, footnote b:
"JPMorgan Chase acquired the banking operations of Washington Mutual Bank for $1.9 billion. The fair value of the net assets acquired exceeded the purchase price which resulted in negative goodwill. In accordance with SFAS 141, non-financial assets that are not held-for-sale were written down against that negative goodwill. The negative goodwill that remained after writing down non-financial assets was recognized as an extraordinary gain."
After writing down part of the negative goodwill, JPM recognized an extraordinary gain of $1.9B. Without this extraordinary gain due to Washington Mutual, JPM would have reported a loss for the quarter.
http://investor.shareholder.com/jpmorganchase/secfiling.cfm?filingID=950123-09-686
FDIC accounting report on receivership detailing assets transferred
http://wmish.com/docs/WaMuReceivershipFinancialStatements(unaudited)thru123108.pdf
JPMorgans hedge fund was amazingly unscathed by the economic turmoil. Good trading sense or is there more to it?
http://www.huffingtonpost.com/2009/03/03/jpmorgan-derivatives-5-bi_n_171312.html
I can only find the part where the fdic says : 1.888 b is the initial payment .
Please enlighten us with your documents or proof for your statement .
No . Where do you see a suggestion in this challenge ?
The trust has til 2018 and everyone with released shares accepted this .
Bkshadow, POR7 is generally understood to mean...
Fdic-r is not released from wrongdoings .
Jpm needs to pay the price of book value for all assets of wmb on top of their initial 1.888 b payment .
All assets at the fdic-r from wmi and its various subs need to be given back to the original owners .
They have til 2018 to get this organized .
Have a nice day .
I am impressed by your ability to count days .
Challenge for you : how many days til the trust gets no further extension ?
What the department of justice says about chapter 11 bancruptcy
... must file with the court: (1) schedules of assets and liabilities; (2) a schedule of current income and ...
http://www.uscourts.gov/services-forms/bankruptcy/bankruptcy-basics/chapter-11-bankruptcy-basics
Too funny that the fdic first mentions the asset list 3.1 as the doj says and then makes it a scriveners error .
Yeah right . Time will tell .
The biggest joke in the wamu saga :
Has anybody seen another bancruptcy without an actual assets list ?
Even the tiniest one man company needs an assets list if they need to file for bancruptcy .
https://www.fdic.gov/bank/individual/failed/wamu.html
Purchase and Assumption Agreement (2.44 MB PDF File - PDF Help)
ATTENTION: The reference to "Schedule 3.1a" in Article III, Paragraph 3.1, (page 9) of the
WAMU P&A Agreement is a scrivener's error—there is no Schedule 3.1a
Yeah right .
Good one haha .
Can you explain why the por7 which youre calling on excludes the release of fdic-r for past wrongdoings ?
Dont forget ... Nobody is releases for actions prior september 25 2008 .
Which makes all of the "old" documents still valuable and significant .
Can you explain why por7 includes things like "all assets that were sold to jpm for the initial 1.888 b need to get paid book value for"?
Have you read all redacted documents ?
Maybe it is all in the filings ... Just not for everybody .
And yes you are right this should have an impact .
How about escrows getting book value for all wamu assets on top of the initial 1.888 billion ?
+ 6 years interest of course.
Any proof for your statement ?
You tell me 1.888 b is the final price for wamu assets ?
How does it come that fdic tells us this is only the first initial payment ?
Do it !
W3research posted a lot of media contacts ...
The spooky part is ... They wont do it ... I guess you dont even get a response .
Tells a lot about media control and journalistic freedom .
Have you seen the asset list 3.1a ...
Aka the "scriveners error" ?
Nobody has seen anything on this matter .
All assets are gone and to this day nobody exept jpm/fdic with hands on the full non redacted documents can tell what asset was worth how much .
Complete black out on this matter so far .
If there is nothing to be found ... Why then hide it ?
This post has no value as a "sticker" . This is just made up assumptions without even a single document to support this single user impression of our situation . Nobody asked for this to be stickied . Please remove . Thank you .
Deutsche bank vs fdic/wmi jpm
http://www.scribd.com/doc/129449424/Deutsche-Bank-vs-JPMorgan-Chase-Bank-FDIC-and-Washington-Mutual-Mortgage-Securities-Corporation-Amended-Complaint-Filed-8sep2010
http://www.scribd.com/doc/129452095/Deutsche-Bank-JPMC-and-Wmmscv-MTD-MPSJ-22nov2010
See page 31: "Under the plain terms of that agreement, JPMC did not become WMB’s successor in interest."
http://www.scribd.com/doc/129445963/Deutsche-Bank-Chase-Memorandum-Support-to-Dismiss-22nov2010
Deutsche Bank NT v FDIC, JPMorgan Chase Bank, NA, and WMMSC: Case#1:09cv-1656 (RMC); Memorandum of Points & Authorities to Support Chase's Motion to Dismiss filed 11/22/2010;
http://www.scribd.com/doc/129447888/Deutsche-Bank-FDIC-Memo-in-Support-of-JPMorgan-Chase-s-Motion-To-Dismiss-filed-22nov2010
http://www.scribd.com/doc/47338403/Deutsche-Bank-Response-to-FDIC-and-JPM-Motions-to-Dismiss
1/14/2011 Deutsche Bank has filed a lawsuit against JP Morgan and the FDIC in Washington, D.C. District Court over deficiencies in the mortgages underlying 159 securitizations sponsored by Washington Mutual. Both JPM, who acquired WaMu out of receivership, and the FDIC, which acted as the receiver for WaMu, point the finger at the other as bearing the responsibility for buying back WaMu's defective loans. In this response by Deutsche Bank, as trustee for these securitizations, the bank argues that both parties should remain on the hook.
Blast from the past
Source : http://wamustory.com
The Speaker is Charlie Scharf, Chief Executive Officer of Retail Financial Services :
"Great brands take a long time to build" - Like the WaMu Brand for instance???
Bottom Line: WaMu was RAPED on her Birthday, by the COLLUSION between JPMorgan, the FDIC, the OTS, the courts, the SEC and persons in government.
Note that many documents linked to in this page have been removed to hide the truth.
Note also the amount paid for WaMu: $1889M. $1M more than the year she was born: 1888. Guess they didn't pick the number out of a hat did they?
Latest Development 6-3-2009: WMI files Counter Claims against JPM for Billions of dollars: WMI Counter Claims
What follows is a detailed timeline of the events surrounding the seizure of Washington Mutual Bank. We have a condensed version here: The Short Version.
Calendar of Important Dates: http://www.my.calendars.net/wmi
5-20-2009: WMI moves to investigate JP Morgan!! Seeks $Billions in damages.
Phrases like 'far below market value', 'premeditated plan', 'designed to damage', 'purchase...on the cheap', 'wrongful conduct', 'sham negotiations', 'misusing confidential information', 'violation of confidentiality agreement', 'unfair advantage', and 'fire sale prices' are in the court motion: CNBC Story
WMI is also suing JPMorgan for return of their $4Billion deposit.
Washington Mutual Inc has filed suit against the FDIC, and seeks damages of approx $40 Billion: WMI vs FDIC Filed Document.
Behind the scenes. The havoc wreaked by some very powerful men: The Goldman Conspiracy:
Latest Monthly Operating Report:: April 2009 Operating Report
From the book 'House Of Cards: A Tale Of Hubris And Wretched Excess On Wall Street' by Cohan, William D.
This book includes proof that Chase/JP Morgan acted in concert with the US Treasury and the Fed to acquire Bear Stearns for a pittance which then set the stage for a repeat-performance when Chase/JP Morgan was allowed to buy Washington Mutual banks at a fire sale price.
Here is a small peek into the inner workings that brought WaMu down:
A final decision had just been made by the US Treasury, i.e., Hank Paulson, in tandem with the Fed and major firms on Wall Street, that there would be no bailout of Lehman Brothers and that Lehman Brothers would be forced into bankruptcy.
After Thain, Paulson and Geithner had left the New York Fed Sunday morning, the following exchange ensued, according to several sources that were there. John Mack, the CEO of Morgan Stanley, spoke up. 'Maybe we should let Merrill [Lynch] go down, too. he said.
Aghast, JPMorgan Chase's [Jamie] Dimon pointed out how shortsighted that was of Mack because Morgan Stanley might be the next firm that counterparties lost faith in. 'John, if we do that, how many hours do you think it would be before Fidelity would call you up and tell you it was no longer willing to roll your paper?'
Dimon's comment quieted Mack. 'We thought Mack said that because he might be buying Merrill,' someone who heard Mack's statement said, and wanted to buy the firm on the cheap. (Mack denied he made the comment through a spokesman. A spokesman for Dimon said Dimon did not remember having the conversation with Mack.)
The Wamu Story
Washington Mutual Bank, or WaMu, as it was known by its customers and employees, was seized on Thursday, September 25, 2008. The OTS intended to seize them on Friday, but the schedule was moved up one day when a media leak threatened to expose the seizure.
This is the story of what happened, and when, as well as some factors that affected the demise and sale of the bank. It should be noted that Washington Mutual Bank (WMB) was the largest thrift in the United States, and one of its largest banks. The seizure and sale were conducted in secret while Washington Mutual Bank was still well capitalized, liquid, while TARP was pending, and in fact at the same time WaMu was seeking bids to sell itself.
Washington Mutual Bank (WMB) was a subsidiary of Washington Mutual Inc. (WMI) Washington Mutual Inc had many other subsidiaries before the seizure and sale by the OTS and the FDIC. They had many less subsidiaries after that transaction-- some that may have not been associated with or subsidiaries of the bank (WMB).
http://www.wamustory.com/subsb4.htm
Subsidiaries Post Seizure See pg.22
http://www.kccllc.net/documents/0812229/0812229081126000000000005.pdf
Washington Mutual had $307B in assets, $188B in deposits, 2239 branches, 4,932 owned and branded ATMs, and 43,198 employees at the time of seizure. They had multiple subsidiaries that were sold as well. The FDIC brokered the “sale” for $1.888 Billion. Washington Mutual began after the “Seattle Fire” of 1889 was seized on its 119th Birthday.
http://tinyurl.com/bp2bfa
The FDIC decided that $1.888 Billion was a just and fair price for the bank. It is interesting to note that the auction offer presented by the FDIC permitted banks to bid $0.0 for the bank, and also totally disregarded the stockholders and bondholders, as well as other liabilities of the bank. The FDIC required only the administrative costs for the transaction, and held the bank for only a few hours before ownership was transferred to JPMorgan. Washington Mutual Bank was forced to file Chapter 11 the following day. They lost $26 Billion in stock of WAMU (WMB) due to the bank seizure.
The recent declines in the stock market are well known, but few people realize that WaMu may have been the straw that broke the camel's back. This seizure impacted not just Washington Mutual Inc investors, but all types of investments in all US stock markets. Shock waves have cascaded throughout stock markets worldwide. This leads one to question whether Washington Mutual Bank should have been seized that September evening. The sale of WAMU, for a fraction of its worth, was conducted without regard for the bondholders or shareholders of the bank, much less for the effects to the confidence in our stock markets and our government in general.
Should WaMu have been seized, that fateful day?
Did the regulatory bodies overseeing WaMu do their jobs properly?
You be the judge.
IN April, 2008, JPM tried to buy Washington Mutual. They had long coveted the thrift for its many branches in markets where they had none and wanted to expand. The price of expanding by themselves, without buying Washington Mutual, was cost-prohibitive. Washington Mutual considered the $8 per share offer from JPMorgan too little for the expansive bank with $307B in assets, $188B in deposits, 2239 branches, 4,932 owned and branded ATMs, and 43,198 employees.
JPMorgans offer was rebuffed and Washington Mutual chose to enter a contract with TPG and several investors instead, for a $7 Billion Capital injection. David Bonderman heads TPG, a company known for its talent in identifying and maximizing investment opportunities. Bonderman had been on the Washington Mutual Board of Directors previously and rejoined the board as part of their agreement.
http://www.tradingmarkets.com/.site/news/BREAKING%20NEWS/1332198/
http://www.tpg.com/about/index.html
“Two months before Washington Mutual failed, Treasury Secretary Henry Paulson warned then-CEO Kerry Killinger that he ought to sell the Seattle-based thrift before it deteriorated further. ‘Paulson said, '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,' said one of several current and former high-ranking WaMu executives familiar with details of the call.”
http://tinyurl.com/cwqjkt
07/15/08--SEC Enhances Investor Protections Against Naked Short Selling
That makes it sound like they were doing their job doesn’t it? Unfortunately it was well known by hedge funds and other “shorters” that the naked short selling ban was not enforced. Naked short selling of Washington Mutual continued to damage Washington Mutual severely and although it is illegal, the SEC did nothing to stop it.
WaMu was not put on the list of banks that were not to be shorted. WaMu CEO Killinger specifically asked for WaMu to be added to the list but was refused. The Short ban notice announcement on 15 July by the SEC was to be effective the 21st. On July 17, Killinger, the CEO, sent a FAX transmittal, requesting to be added to the “no short” list and was refused. It is interesting to note the fax, which was received on the 17th was logged in as received 8:40pm on the 22nd by the "Chairman's Correspondence Unit".
http://www.sec.gov/news/press/2008/2008-143.htm
http://www.sec.gov/rules/other/2008/34-58166.pdf
http://edgar.sec.gov/comments/s7-20-08/s72008-553.pdf
The American Bankers Association, representing the interest of 8,500 banks, said in a letter to the SEC that it fears short sellers will now concentrate their efforts on banks that are not covered by the emergency order. They asked that the order be expanded to include stocks of all banks and bank holding companies. This request was also ignored.
http://www.mortgagenewsdaily.com/7222008_Short_Sell_Banks.asp
Evidence of Damage Caused by Naked Short Selling: WAMU Stock Price vs. Failure to Deliver (FTD) of Securities
http://www.deepcapture.com/wp-content/uploads/2008/09/wamu.png
September 29, 2008
American Banker magazine cites that the OTS did not want to seize the bank but the FDIC pressured them into it.
http://tinyurl.com/amr3jy
It has been widely discussed that the FDIC was under funded to cover the amount of deposits they had to insure, and that the FDIC and OTS had differing opinions about whether WAMU should be seized. The FDIC feared depletion of its reserves and they expected other bank failures. Congress had not increased its ability to raise premiums for many years, and indeed no bank premiums were collected from 1996 to 2006, as the FDIC was at its maximum threshold as required by law. They have since increased their premiums.
It is interesting to note however, the FDIC did have the ability to borrow $30 Billion from the Treasury at the time. It is not clear why they did not use their discretionary power to support the one of the largest banks in the country, at least on a temporary basis. The bank had access to $54 Billion of liquidity at that time--$4 Billion was on deposit at Washington Mutual Bank and another $50 Billion was available, assumedly from the secondary window at the Federal Reserve in San Francisco.
http://www.nypost.com/seven/09262008/business/capitol_wamu_ve_130800.htm
http://www.kccllc.net/documents/0812229/0812229081009000000000002.pdf
While all of this was happening the Economic Stabilization Act was being discussed in Congress. While there was no question that TARP, as it has come to be known, would eventually pass, there were arguments over many details to be worked out. The bailout would have alleviated the banks difficulties, at least in the short term, until a proper sale could be arranged, rather than a "fire sale" which ultimately gave the bank away for far less than fair value. The fact that the bailout was pending meant banks were hesitant to bid due to the uncertainty; this has been well documented in multiple news articles.
http://files.ots.treas.gov/73002.pdf
http://ori.msnbc.msn.com/id/26859148/
OTS fact sheet
NOTE: There is no record of any document wherein WaMu was required to raise additional capital, or improve its liquidity.
On 09/25/08 the OTS released a press release and recording about the seizure of Washington Mutual...it notes they were well-capitalized at the time of the seizure.
http://tinyurl.com/abm8gf
OTS Enforcement Actions noted on this report.
-- October 17, 2007 – Issued a Cease and Desist Order related to deficiencies in Bank
Secrecy Act/Anti-Money Laundering (BSA/AML) programs
-- October 17, 2007 – Assessed Civil Money Penalties (CMPs) related to violation of
flood insurance regulations
-- November 14, 2007 – Initiated a formal examination of the appraisal process to
assess the validity of a complaint filed by the New York Attorney General’s
(NYAG) Office
-- February 27, 2008 – Issued overall composite ratings downgrade and received a
Board resolution in response to the supervisory action
-- June 30, 2008 – Initiated discussions about Memorandums of Understanding with
WMI and WMB (Washington Mutual Bank)
-- September 7, 2008 - Issued Memorandums of Understanding to WMI and WMB
-- September 18, 2008 – Issued overall composite ratings downgrade
OTS Press release recording
Discusses the bank seizure.
http://files.ots.treas.gov/4811117.mp3
Sept 8, 2008. WaMu said that it has entered into a memorandum of understanding with the Office of Thrift Supervision concerning aspects of its operations. WaMu committed to provide the OTS with an updated, multi-year business plan and forecast for its earnings, asset quality, and capital and business segment performance. The plan did not require the company to raise capital or increase liquidity, WaMu said. (This plan was approved by the OTS)
http://articles.latimes.com/2008/sep/09/business/fi-wamu9
http://www.usatoday.com/money/economy/2008-09-08-3382390904_x.htm
http://tinyurl.com/brsvfq
09/11/08: WaMu provides an Update on Expectations for Third Quarter Performance and notes the company continues to maintain a strong liquidity position with approximately $50 billion of liquidity from reliable funding sources. “The company's tier 1 leverage and total risk-based capital ratios at June 30, 2008 were 7.76%, and 13.93%, respectively, which were significantly above the regulatory requirements for well capitalized institutions. The company expects both ratios to remain significantly above the levels for well-capitalized institutions at the end of the third quarter.” (newsroom.wamu.com)
http://newsroom.wamu.com/phoenix.zhtml?c=189529&p=irol-newsArticle_Print&ID=1196448&highlight=
http://www.reuters.com/article/pressRelease/idUS238676+11-Sep-2008+BW20080911
12/31/08: OTS press release regarding TARP after they saw what mayhem the seizure of Washington Mutual caused.
http://www.ustreas.gov/press/releases/reports/0010208%20sect%20102.pdf
It is interesting to note that the West Coast Regional Director, Darrel Dochow, was transferred after it was discovered there were irregularities in bookkeeping methods, which were approved by Dochow, in the Indy Mac failure. It has been also revealed that he permitted bookkeeping irregularities with 4 other banks in his region. The other banks have not been named. Dochow had also been implicated in oversight failures in the Savings and Loan crisis in the 1980’s and 1990’s. Dochow was demoted after that, but was later promoted again to West Coast Regional Director. He was transferred after the Indy Mac irregularities were made public and he later retired.
http://www.nytimes.com/2008/12/23/business/23thrift.html?_r=1&ref=business
FDIC Actions that adversely affected the sale and auction of Washington Mutual
09/23/08: FDIC auction "offer" -- essentially says that the bidders can have the bank for nothing as long as they pay the administrative costs of the transaction. (which are left blank) It also says they can have any assets, whether they are on the banks books or not (this info is on page one).
http://wmish.com/docs/gib/Washington_Mutual_Bank_Closing_Book.pdf
Sheila Bair said that the Washington Mutual seizure was done at no cost to the taxpayers, but what were the administrative costs? That part of the agreement was left blank. The shareholders and bondholders who lost as much as $30 Billion were not considered, nor were the corporations, Pension plans, or other institutions who owned (at that time) approximately 68% of Washington Mutual Common Stock. (E-trade). Retirements for many people were wiped out either directly by the loss of value in Washington Mutual Stock, or indirectly through the loss in their Pension plans, 401K’s and the general market panic that ensued. There is also a human cost; JPM has announced layoffs of 9200 WaMu employees with plans to cut an additional 2800 by attrition. It has recently been noted in the news that JPMorgan has made plans to outsource many jobs in their organization.
All the following documents regarding the FDIC auction are posted at http://wmish.com/docs/ and were supplied by the FDIC via FOIA (Freedom of Information Act)
FDIC sends out “official” bid notice. Date of fax –Sept 24, 2008.
Excerpt:
“5. Definitive Documents. Each Potential Acquirer's bid(s) should be based upon the relevant transactions described in the Legal Documents and these Instructions. Each should note that the transactions are merely summarized herein and the Legal Documents are much more detailed. The Legal Documents will govern the transaction regardless of the contents of these Instructions and any other written or oral material or communication.”
http://wmish.com/docs/gib/WaMuBidInstructions.pdf
JPMorgan bid for WAMU…NOTE: The details of the bid are redacted.
http://wmish.com/docs/JPMCoverLetter.pdf
Washington Mutual Bank Closing book Sept 25, 2008: Date of seizure.
Excerpt:
“The bid for alternatives 1, 2, or 3 must be at least the FDIC's administrative costs of the closing equal to $_________________ (amount to be provided).
Assets Purchased: The Assuming Bank will purchase all assets whether or not on the books of the Bank, except for those that are specifically excluded under Article III of the Whole Bank agreement. In general, all assets are acquired at book value with the exception of securities which are purchased at fair market value.”
http://wmish.com/docs/gib/Washington_Mutual_Bank_Closing_Book.pdf
Of note, there was another bid for the bank. The FDIC will not release any information on that bid. Another FOIA request confirmed the bidder as Citigroup, but their bid was deemed "nonconforming" and the information was so heavily redacted that it was nearly a black page.
http://i34.tinypic.com/73dxg0.jpg
Also of note, banks were quoted as saying they would not bid on WAMU until they saw what would happen with TARP. Congress was debating the issues and it was expected to pass at any time. TARP passed 8 days after WAMU was seized.
Four banks submitted their plans by the Wednesday due date, and the same day JPMorgan was notified it had won. The FDIC declined to name the other participating banks.
http://www.reuters.com/article/etfNews/idUSN2631577020080926
The FDIC updated their billing process on Sep 23rd, the same day they secretly put WAMU on the auction block. The seizure was later moved up one day due to a “leak”-- the secret auction was no longer a secret and had been leaked to the press. Though widely discussed in the press, the source of the leak has not been identified.
http://www.fdicig.gov/reports08/08-018.pdf
FDIC Purchase and Assumption Agreement
http://www.fdic.gov/about/freedom/Washington_Mutual_P_and_A.pdf
NOTE: It cites Schedule 3.1a as a list of the assets to be purchased. After someone wrote the FDIC wanting a copy of that list, they then changed the FDIC website indicating that it was a scrivener’s error and no 3.1a document exists. It appears there is NO LIST of what was included in the purchase.
Statement of Assets & Liabilities in Liquidation (unaudited) FDIC document
It should be noted that the value placed on Washington Mutual Bank varies widely, depending on the source. The figures cited by the FDIC are noted to be "unaudited".
http://wmish.com/docs/WaMuReceivershipFinancialStatements(unaudited)thru123108.pdf
JPMorgan divulges they knew about the seizure Sep 19th, and it actually sounds like the “deal was done” before the auction began.
Investor’s Day 26 FEB 2009 08:30
Charlie Scharf (JPMorgan) said, at their Investor’s Day Conference, they were notified about the bank seizure on Sept. 19, 2008. Fast forward to 3 hours 14 minutes to hear the following excerpt:
"We did a lot of work over a long period of time...really analyzing the company, and then when the deal got done, it happened very very quickly.
Got the call from the FDIC on a Friday (9-19), they came to meet with us on a Monday (9-22), the deal was announced Thursday night (9-25). the deal was announced Thursday night, that night as Mike mentioned Rick raised $11B of capital, and then Friday morning, Todd was in California and Gordon was in California, different places cause uh Irvine vs. San Fran.
I was out in ah Seattle, Frank came out to Seattle, J (Dimon) was out in Seattle, the place…you know it was ours the next day...very, you know non traditional transaction with immediate ownership"..."the business was seized by the FDIC" -- Charlie Scharf, Chief Executive Officer of Retail Financial Services.
Charlie Scharf Speaking:
http://tinyurl.com/bte8qq
A little known fact is that Washington Mutual had $50 Billion cash available from the secondary Fed Reserve Window in San Francisco. One must wonder whether the OTS and the FDIC knew about this. It is apparent the FDIC did not know about the $4 Billion dollar deposit, as they later tried to claim it in bankruptcy court. JPM also tried to claim this money in court. The court determined the money belonged to the parent company, Washington Mutual Inc. (WMI).
http://www.kccllc.net/documents/0812229/0812229081009000000000002.pdf
It appears JPMorgan may have known well in advance of the plans for seizure (by some reports three weeks in advance). It is unknown whether the other banks were also unofficially informed of the seizure, well in advance. Was the auction a fair playing field? Did all the bidders have the same information JPMorgan had?
Washington Mutual was not aware of these backroom discussions between JPM and the FDIC. In fact, Washington Mutual, through Goldman Sachs, was trying to sell the bank on the open market to those very same banks, but curiously their attempt drew no bidders.
Why would a bank bid openly with Washington Mutual when they knew the FDIC was offering a deal, behind Washington Mutuals back for only the choicest assets instead of the entire bank? The FDIC was offering a much better deal, then Washington Mutual was able to offer, you see the FDIC offered the bank for the price of $00.00. Their behind the scenes discussions interfered with the banks ability to sell itself.
Did JPM know three weeks prior to Sept 25 of a possible FDIC seizure? Was the bidding process fair and impartial? That is an issue for a Congressional Hearing to decide. The entire matter is currently under a clandestine investigation. Many shareholders have contacted their Congressional Representatives requesting an open Congressional Hearing on this matter. In most cases they have received no response from Congress.
Sheila Bair said, shortly after the seizure of Washington Mutual, the seizure was stepped up due to a leak. “Washington Mutual was on the radar for some time, said Bair, who noted that the timetable for the seizure was bumped up due to a potential media leak. She added that all deposits, both insured and uninsured are covered.”
http://www.economicnews.ca/cepnews/wire/article/126804
But here she says it was stepped up due to its deteriorating condition. She said that “the bank’s rapidly deteriorating condition prompted regulators to seize it Thursday, and not on a Friday as is typical for bank closures. “ Which is it Ms. Bair? On the date of seizure (earlier in the day than the bank was seized), CNBC aired a short news clip about a bank run they identified as Washington Mutual, and then “broke” for commercial. When they came back online they noted that the previous story was inaccurate, and the bank run was at a different bank (Indy Mac?).
http://www.nytimes.com/2008/09/26/business/26wamu.html?_r=1&ref=us
News stories often report that Washington Mutual was seized after withdrawals of $16.7 Billion over a nine day period which began on Sep 15th. As we now know, there were plans to seize Washington Mutual before the 25th. In fact, JPMorgan was notified Sept 19th about the seizure, and indeed knew about the prospects for seizure three weeks in advance. No information has been released regarding the situation at the time the OTS began making plans to seize the institution.
http://www.huffingtonpost.com/2008/09/25/jp-morgan-to-buy-wamu-ass_n_129451.html
Later, Paul Kanjorski stated on national television that there was a $550 Billion drawdown in the market at this time. What effect did this have on the seizure of Washington Mutual?
The “Economic Meltdown”
09/18/08: It has recently come to light that on the 18th of September there was a 550 Billion dollar drawn down on money market funds during a 2 hour period, and there was panic among regulators
(Frontline--PBS). This indicates that most, if not all, banks were under significant pressure at that time. There is much discussion about the veracity of this statement by Paul Kanjorski.
http://tinyurl.com/cur3nl
http://online.wsj.com/article/SB122869788400386907.html?mod=todays_us_page_one
Why was Washington Mutual singled out when this draw down was occurring at all banks? There was a systemic country wide financial meltdown; why was WAMU seized? Washington Mutual was liquid and well capitalized. The seizure was unjustified, premature, and unwarranted.
The FDIC arranged a similar transaction in the case of Citigroup's acquisition of Wachovia for $2.1 billion. It was in the form of a forced sale, under the threat of seizure. The agreement reached would have required federal assistance to mitigate risk to Citigroup. However, Wells Fargo offered $15 billion to purchase Wachovia outright shortly thereafter despite Citi's signed deal. A legal battle ensued, the FDIC maintained that it stood behind Citigroup and the deal it had brokered, but Wells Fargo was the eventual victor due to their superior offer.
http://online.wsj.com/article/SB122303190029501925.html
http://northcoastinvestmentresearch.wordpress.com/tag/wfc/
Perhaps the differentiating factor was the fact that the sale of Wachovia was done publicly, over a period of a week or more, rather than secretly over a period of hours, as the WAMU "deal" had been completed.
Stock market charts show that the day following the seizure of WAMU, the markets took a nosedive. This is thought to be because investors felt they could no longer trust the government, since they had become erratic in their treatment of the banking crisis. The OTS/FDIC caused the very thing it is supposed to prevent: a bank panic. The premature seizure destroyed the value of WaMu's bondholders and stockholders, at the same time destroying confidence in the market. Why invest in any publicly traded company if the government can arbitrarily seize your interest, leaving you nothing, or perhaps pennies on the dollar?
Note the market performance since the 09/25/2008 seizure:
Click on image to enlarge
How J.P. Morgan Raised $11.5 Billion in 24 Hours
http://blogs.wsj.com/deals/2008/09/29/how-jp-morgan-raised-115-billion-in-24-hours/
Three weeks before JPMorgan bought WaMu’s deposits for $1.9 billion, officials at the Federal Deposit Insurance Corporation had called JPMorgan to say that the FDIC was carefully monitoring WaMu and that a seizure of its assets was likely. There have been no news articles indicating that the other banks were notified at that time.
http://blogs.wsj.com/deals/2008/09/29/how-jp-morgan-raised-115-billion-in-24-hours/
Since the seizure, JPMorgan and the FDIC have challenged Washington Mutual Inc (the Holding Company that owned WMB) on tax benefits of writing off its losses prior to the seizure.
http://www.reuters.com/article/governmentFilingsNews/idUSN3025944620081030
01/22/09: JPMorgan objects to having to show what they bought (file claim) by 3/31/09. That may be because they can't; there is no list in the Purchase and Assumption Agreement (3.1a), although the purchase agreement cites there should be. The purchase agreement is incomplete. JPMorgan objected to having to show any claim by the claim filing deadline. Their objection was overruled by Judge Walrath, the judge presiding over the bankruptcy case.
http://www.kccllc.net/documents/0812229/0812229090122000000000001.pdf
Claim against the FDIC
02/05/09: Weil and Gotshal have filed a claim against the FDIC (December 30, 2008). WMI was given $0.00 for the bank, despite a book value well over $20 billion at the time of seizure. The FDIC failed to get a reasonable price, even though they are required by law to maximize the return on the assets seized as well as to minimize the impact to the FDIC fund. There are many differing opinions on what the value of the bank was, but of the sources we could find, none felt the bank was worth a mere $1.9 Billion. JPMorgan got the bank at a substantial discount, as they have documented well in their SEC filings. They even booked a $1.9 Billion gain the next quarter – not a bad return for three months. The FDIC also gave JPMorgan many subsidiaries. Some of those subsidiaries may not have been on the banks books, and in fact may have belonged to the parent holding company, Washington Mutual Inc (WMI). WMI filed a claim against the FDIC's receivership on 12/30/2008. According to a Weil & Gotshal representative, the claim submitted to the FDIC was denied in late January 2009.
Page 9
http://www.kccllc.net/documents/0812229/0812229090205000000000005.pdf
SEC did not do its job; illegal short selling damaged WaMu
7/21/08: SEC bans “naked” short selling in certain financial stocks. Washington Mutual is not included on the list.
http://www.sec.gov/rules/other/2008/34-58166.pdf
http://www.mortgagenewsdaily.com/7222008_Short_Sell_Banks.asp
9/17/08: SEC bans “naked” short selling of all stocks.
http://www.sec.gov/rules/other/2008/34-58572.pdf
9/18/08: SEC bans short selling of 799 financial companies, including Washington Mutual.
http://www.sec.gov/rules/other/2008/34-58592.pdf
General resource on the surrounding economic legislation and SEC and FED actions:
http://www.philadelphiafed.org/payment-cards-center/legislative-update/2008/3q/
Did the FDIC do their job properly after the seizure of Washington Mutual?
Sheila Bair, in a 60 Minutes episode which aired on March 8, 2009, said that the FDIC did not shutter big banks. Washington Mutual was a big bank and the fallout from its seizure was widely felt in the US markets and indeed around the world. Stockholders were essentially wiped out in this seizure, due to the fact that the FDIC permitted the deal to be written with no regard to provisions for the stockholders. Although it is unknown exactly what the total losses were, it is estimated it could be as high as $30 billion. Many of these stockholders were Pension Funds, large institutions, as well as individuals 401K's, IRA's and other private accounts. The question at this point is whether the FDIC acted appropriately in only getting 1.9 Billion dollars, and allowing the stockholders to be left out of the transaction, and completely out in the cold. Many institutions were severely impacted by the sale agreement the FDIC arranged. The sale agreement had far reaching, adverse effects both on portfolios and the market in general.
9-17-08: A WSJ article states that WaMu has hired Goldman Sachs to find a buyer of the bank.
9-18-08: WaMu's rating slips to a 4 and is placed on the FDIC's watch list, a fact kept secret at the time to prevent a self-fulfilling run on the bank. A 4 rating reflects financial, operational or managerial weaknesses that threaten a bank's financial viability.
9-19-08, Friday: FDIC talks with JPM about WaMu. (From JPM presentation on 2-26-09)
9-22-08, Monday: FDIC meets with JPM. (From JPM presentation)
9-24-08, Wednesday: 4 banks reportedly submitted bids/plans to FDIC by the deadline set by the FDIC:
FDIC Chairman Sheila Bair told reporters on Thursday that after an open process to find a buyer failed, the agency turned to its secretive auction process in which bidders place their offers on a secured website. The auction turned out to be not so secret when a media leak prompted early seizure of the bank. The "leak" has not been identified.
Which other organizations bid for WaMu, and the contents of those bids, have not been revealed by the FDIC. Here is an abbreviated timeline of what happened.
9-24-08, Wednesday 6:44PM: JPM submits bid to FDIC of $1,888M
9-25-08, Thursday: OTS seizes WaMu and gives it to FDIC
9-26-08, Friday: FDIC sells WaMu to JPM for $1,888,000,000.
2-26-09: JPM states that the WaMu transaction was 'very non-traditional'. (From shareholder presentation).
Did the FDIC do a fair and impartial auction?
Were all banks given the same information at the same time? By some reports JPMorgan knew of the auction 3 weeks prior. Did other banks have that same advantage? JPM was notified on Friday, 9-19 that they would get the bank. That was days before the auction officially began. Of note, JPMorgan raised approximately $11 Billion for the purchase, yet they managed to buy the bank for a mere $1.9 Billion. The auction permitted the banks to bid $0 for the bank, and totally disregard the stockholders and bondholders. Although stockholders and bondholders are not technically the FDIC's responsibility, was it wise or fair to totally disregard the interests of these stakeholders?
FDIC regulations as quoted from their official website:
http://www.fdic.gov/regulations/laws/rules/1000-1220.html#1000sec.11d
12 U.S.C. 1821(d)
13) ADDITIONAL RIGHTS AND DUTIES.--
(E) DISPOSITION OF ASSETS.--
(i) maximizes the net present value return from the sale or disposition of such assets
(ii) minimizes the amount of any loss realized in the resolution of cases
(iii) ensures adequate competition and fair and consistent treatment of offerors
How Did JPMorgan Chase (JPM) Profit from the purchase of WaMu's banking assets for $1.888 Billion?
JPMORGAN CHASE Acquires the deposits, assets and certain liabilities of WASHINGTON MUTUAL’S banking operations
http://tinyurl.com/aq3v4w
JPM's Bid For WaMu via FOIA Request
http://wmish.com/docs/gib/JPMorgan_Bid_September_24_2008.pdf
What Did JPM Purchase?
It is still not clear exactly what JPM purchased from the FDIC on 09/25/08, because their Purchase and Assumption agreement didn't disclose exactly what was sold, other than as stated in paragraph 3.1, "...all of the assets (real, personal and mixed, wherever located and however acquired) including all subsidiaries, joint ventures, partnerships, and any and all other business combinations or arrangements, whether active, inactive, dissolved or terminated, of the Failed Bank whether or not reflected on the books of the Failed Bank as of Bank Closing." This statement clearly did not address the possibility of joint ownership of assets by Washington Mutual Bank (WMB) and their holding company, Washington Mutual Inc. (WMI). The seizure of assets which were not on WMB's books leaves open the real possibility that some of those assets actually belonged either solely to WMI or were owned jointly and as such were not rightfully seized.
It appears that that Schedule 3.1a had been intended to be more specific regarding the assets sold. This section is missing, despite being referenced repeatedly in the version of the document posted initially on the FDIC's website.
http://www.fdic.gov/about/freedom/Washington_Mutual_P_and_A.pdf
An early rough draft was obtained by FOIA request:
http://wmish.com/docs/gib/Washington_Mutual_Bank_Closing_Book.pdf
What Did JPM Gain?
JPM had long coveted WaMu's West coast branch network, and had earlier offered $8 per common share for the entire company, an offer that would have assumed all debt and preferred stock of both WMB and WMI. It was rebuffed at the time for being too low; it was less than WMI common stock's market price at that time.
Through the seizure and acquisition, JPM expanded its' banking footprint into states with little Chase coverage. These include Washington, Oregon, California, and Florida. Along with $307B in assets they acquired $188B in deposits, 2239 branches, 4,932 owned and branded ATMs, and 43,198 employees.
They were also given the ability to return any branches they didn't want to the FDIC. JPM has indicated it would lay off 9,200 employees and recently indicated they would cut another 2,800 positions through attrition; the cuts total nearly 30% of WaMu's employees. Included in the purchase price was $1.5B of real estate or other assets (JPM's 10K, 12/31/08, p 82) and WMB's credit card business.
JPM's 10K, 12/31/08
http://www.secinfo.com/dsvr4.s3xf.htm#1stPage
Listed figures are as of 06/30/08 as stated in the OTS fact sheet below.
http://files.ots.treas.gov/73002.pdf
WMB's credit card business had been expanded on June 6, 2005 with the purchase of Providian Financial for $6.45B. JPM assumed both the WMB and Providian credit card subsidiaries along with all other subsidiaries of the bank. $10.6 Billion in credit card receivables were included.
http://en.wikipedia.org/wiki/Providian
JPM's Loan Portfolio
JPM stated in their conference call on 09/25/08 that the transaction would be, "Accretive immediately, 50 cents" (per share), and that it would result in a "Net cost savings (of) $1.5B, conservatively." "$176B (of) home loans (were) assumed", with "$30.7B losses projected."
http://wamucoup.com/JPM_telecon_all.wma
"Just shy of $300B of assets" were assumed, with net assets of $31B after deducting liabilities. JPM then stated they would mark down $31B related to the loans. Coincidence? JPM can use those write downs to offset $31B in profits, resulting in a significant tax savings. At a 35% tax rate, (general business tax rate) this represents a tax savings of approximately $10.85 Billion.
When asked about loan losses if the economy were to worsen, JPM stated that even under the pessimistic assumption if the loan losses exceeded expectations, the worst they would do would be to end up flat. Why? Due to the fact that the other WMB assets would still be making money. JPM stated, "This transaction's generating $12B of capital over the next 3 years.” (That is after taxes.) The WMB acquisition would result in, a "stable, predictable earnings stream" due to retail customers.
JPMorgan Chase acquired the banking operations of Washington Mutual Bank for $1.9 billion. The fair value of the net assets acquired exceeded the purchase price which resulted in negative goodwill. In accordance with SFAS 141, non-financial assets that are not held-for-sale were written down against that negative goodwill. (Negative goodwill is a positive gain on a balance sheet due to gains that cannot otherwise be accounted for.) The negative goodwill that remained after writing down non-financial assets was recognized as an extraordinary gain."
JPM 10K for 12/31/08; p 26, note (d)
http://www.secinfo.com/dsvr4.s3xf.htm#1stPage
“Effective September 25, 2008, JPMorgan Chase acquired the banking operations of Washington Mutual Bank for $1.9 billion. The fair value of the net assets acquired exceeded the purchase price which resulted in negative goodwill. In accordance with SFAS 141, non-financial assets that are not held-for-sale were written down against that negative goodwill. The negative goodwill that remained after writing down non-financial assets was recognized as an extraordinary gain in 2008.”
After writing down part of the negative goodwill, JPM recognized an extraordinary gain of $1.9B. Without this extraordinary gain due to Washington Mutual, JPM would have reported a loss for the quarter.
FDIC accounting report on receivership detailing assets transferred
http://wmish.com/docs/WaMuReceivershipFinancialStatements(unaudited)thru123108.pdf
JPMorgans hedge fund was amazingly unscathed by the economic turmoil. Good trading sense or is there more to it?
http://www.huffingtonpost.com/2009/03/03/jpmorgan-derivatives-5-bi_n_171312.html
So to sum it up, JPMorgan Chase acquired a massive branch and credit card network that augmented their footprint in areas where they were weak. For $1.9B, they acquired 2,239 branches in lucrative markets that would have cost many billions to construct themselves. They obtained an immediate $1.9B financial gain on the transaction, have a future tax savings of $10.85 Billion, and expect to make an additional $12 Billion in after tax profit over the next three years. And after that they are left with a profitable bank that will continue to generate billions of dollars of profits every year for the foreseeable future.
The question remains. Was this a fair auction? Did government regulators do their jobs properly? Was Washington Mutual fairly compensated for its bank?
Should Washington Mutual have been seized at all?
You be the judge.
Latest Developments and Links:
1. JP Morgan responsible for destruction of financial system:
http://www.marketoracle.co.uk/Article6826.html
2. WSJ FDIC memorandum:
http://online.wsj.com/public/resources/documents/wamu_memo.pdf
3. Geithner, Paulson named in $200 billion lawsuit
http://www.worldnetdaily.com/index.php?fa=PAGE.view&pageId=94539
4. -WAMU was in a lot worse shape in 2007:
http://wmish.com/docs/var/CAPITAL%20AND%20PROMPT%20CORRECTIVE%20ACTION%20RATIOS.doc
5. Feds say WAMU WAS the cause of collapse:
http://www.newyorkfed.org/research/conference/2009/cblt/interbank_market_HHH_jan09.pdf
7. JPM Shareholder Pamphlet::
http://tinyurl.com/cj9a3w
8. WMI Documents:
http://www.mediafire.com/wmi
9. Battle Brewing over Fire Sale of WaMu Banking Assets:
http://tinyurl.com/cz2soy
10 JPM Lawsuit against WMI:
http://amlawdaily.typepad.com/jp.pdf
11. NY Times Slams the OTS:
http://www.nytimes.com/2009/04/09/business/09views.html
Disclaimer: Click Here
September 29, 2008
American Banker magazine cites that the OTS did not want to seize the bank but the FDIC pressured them into it.
http://tinyurl.com/amr3jy
It has been widely discussed that the FDIC was under funded to cover the amount of deposits they had to insure, and that the FDIC and OTS had differing opinions about whether WAMU should be seized. The FDIC feared depletion of its reserves and they expected other bank failures. Congress had not increased its ability to raise premiums for many years, and indeed no bank premiums were collected from 1996 to 2006, as the FDIC was at its maximum threshold as required by law. They have since increased their premiums.
It is interesting to note however, the FDIC did have the ability to borrow $30 Billion from the Treasury at the time. It is not clear why they did not use their discretionary power to support the one of the largest banks in the country, at least on a temporary basis. The bank had access to $54 Billion of liquidity at that time--$4 Billion was on deposit at Washington Mutual Bank and another $50 Billion was available, assumedly from the secondary window at the Federal Reserve in San Francisco.
http://www.nypost.com/seven/09262008/business/capitol_wamu_ve_130800.htm
http://www.kccllc.net/documents/0812229/0812229081009000000000002.pdf
While all of this was happening the Economic Stabilization Act was being discussed in Congress. While there was no question that TARP, as it has come to be known, would eventually pass, there were arguments over many details to be worked out. The bailout would have alleviated the banks difficulties, at least in the short term, until a proper sale could be arranged, rather than a "fire sale" which ultimately gave the bank away for far less than fair value. The fact that the bailout was pending meant banks were hesitant to bid due to the uncertainty; this has been well documented in multiple news articles.
http://files.ots.treas.gov/73002.pdf
http://ori.msnbc.msn.com/id/26859148/
OTS fact sheet
NOTE: There is no record of any document wherein WaMu was required to raise additional capital, or improve its liquidity.
On 09/25/08 the OTS released a press release and recording about the seizure of Washington Mutual...it notes they were well-capitalized at the time of the seizure.
http://tinyurl.com/abm8gf
OTS Enforcement Actions noted on this report.
-- October 17, 2007 – Issued a Cease and Desist Order related to deficiencies in Bank
Secrecy Act/Anti-Money Laundering (BSA/AML) programs
-- October 17, 2007 – Assessed Civil Money Penalties (CMPs) related to violation of
flood insurance regulations
-- November 14, 2007 – Initiated a formal examination of the appraisal process to
assess the validity of a complaint filed by the New York Attorney General’s
(NYAG) Office
-- February 27, 2008 – Issued overall composite ratings downgrade and received a
Board resolution in response to the supervisory action
-- June 30, 2008 – Initiated discussions about Memorandums of Understanding with
WMI and WMB (Washington Mutual Bank)
-- September 7, 2008 - Issued Memorandums of Understanding to WMI and WMB
-- September 18, 2008 – Issued overall composite ratings downgrade
OTS Press release recording
Discusses the bank seizure.
http://files.ots.treas.gov/4811117.mp3
Sept 8, 2008. WaMu said that it has entered into a memorandum of understanding with the Office of Thrift Supervision concerning aspects of its operations. WaMu committed to provide the OTS with an updated, multi-year business plan and forecast for its earnings, asset quality, and capital and business segment performance. The plan did not require the company to raise capital or increase liquidity, WaMu said. (This plan was approved by the OTS)
http://articles.latimes.com/2008/sep/09/business/fi-wamu9
http://www.usatoday.com/money/economy/2008-09-08-3382390904_x.htm
http://tinyurl.com/brsvfq
09/11/08: WaMu provides an Update on Expectations for Third Quarter Performance and notes the company continues to maintain a strong liquidity position with approximately $50 billion of liquidity from reliable funding sources. “The company's tier 1 leverage and total risk-based capital ratios at June 30, 2008 were 7.76%, and 13.93%, respectively, which were significantly above the regulatory requirements for well capitalized institutions. The company expects both ratios to remain significantly above the levels for well-capitalized institutions at the end of the third quarter.” (newsroom.wamu.com)
http://newsroom.wamu.com/phoenix.zhtml?c=189529&p=irol-newsArticle_Print&ID=1196448&highlight=
http://www.reuters.com/article/pressRelease/idUS238676+11-Sep-2008+BW20080911
12/31/08: OTS press release regarding TARP after they saw what mayhem the seizure of Washington Mutual caused.
http://www.ustreas.gov/press/releases/reports/0010208%20sect%20102.pdf
It is interesting to note that the West Coast Regional Director, Darrel Dochow, was transferred after it was discovered there were irregularities in bookkeeping methods, which were approved by Dochow, in the Indy Mac failure. It has been also revealed that he permitted bookkeeping irregularities with 4 other banks in his region. The other banks have not been named. Dochow had also been implicated in oversight failures in the Savings and Loan crisis in the 1980’s and 1990’s. Dochow was demoted after that, but was later promoted again to West Coast Regional Director. He was transferred after the Indy Mac irregularities were made public and he later retired.
http://www.nytimes.com/2008/12/23/business/23thrift.html?_r=1&ref=business
FDIC Actions that adversely affected the sale and auction of Washington Mutual
09/23/08: FDIC auction "offer" -- essentially says that the bidders can have the bank for nothing as long as they pay the administrative costs of the transaction. (which are left blank) It also says they can have any assets, whether they are on the banks books or not (this info is on page one).
http://wmish.com/docs/gib/Washington_Mutual_Bank_Closing_Book.pdf
Sheila Bair said that the Washington Mutual seizure was done at no cost to the taxpayers, but what were the administrative costs? That part of the agreement was left blank. The shareholders and bondholders who lost as much as $30 Billion were not considered, nor were the corporations, Pension plans, or other institutions who owned (at that time) approximately 68% of Washington Mutual Common Stock. (E-trade). Retirements for many people were wiped out either directly by the loss of value in Washington Mutual Stock, or indirectly through the loss in their Pension plans, 401K’s and the general market panic that ensued. There is also a human cost; JPM has announced layoffs of 9200 WaMu employees with plans to cut an additional 2800 by attrition. It has recently been noted in the news that JPMorgan has made plans to outsource many jobs in their organization.
All the following documents regarding the FDIC auction are posted at http://wmish.com/docs/ and were supplied by the FDIC via FOIA (Freedom of Information Act)
FDIC sends out “official” bid notice. Date of fax –Sept 24, 2008.
Excerpt:
“5. Definitive Documents. Each Potential Acquirer's bid(s) should be based upon the relevant transactions described in the Legal Documents and these Instructions. Each should note that the transactions are merely summarized herein and the Legal Documents are much more detailed. The Legal Documents will govern the transaction regardless of the contents of these Instructions and any other written or oral material or communication.”
http://wmish.com/docs/gib/WaMuBidInstructions.pdf
JPMorgan bid for WAMU…NOTE: The details of the bid are redacted.
http://wmish.com/docs/JPMCoverLetter.pdf
Washington Mutual Bank Closing book Sept 25, 2008: Date of seizure.
Excerpt:
“The bid for alternatives 1, 2, or 3 must be at least the FDIC's administrative costs of the closing equal to $_________________ (amount to be provided).
Assets Purchased: The Assuming Bank will purchase all assets whether or not on the books of the Bank, except for those that are specifically excluded under Article III of the Whole Bank agreement. In general, all assets are acquired at book value with the exception of securities which are purchased at fair market value.”
http://wmish.com/docs/gib/Washington_Mutual_Bank_Closing_Book.pdf
Of note, there was another bid for the bank. The FDIC will not release any information on that bid. Another FOIA request confirmed the bidder as Citigroup, but their bid was deemed "nonconforming" and the information was so heavily redacted that it was nearly a black page.
http://i34.tinypic.com/73dxg0.jpg
Also of note, banks were quoted as saying they would not bid on WAMU until they saw what would happen with TARP. Congress was debating the issues and it was expected to pass at any time. TARP passed 8 days after WAMU was seized.
Four banks submitted their plans by the Wednesday due date, and the same day JPMorgan was notified it had won. The FDIC declined to name the other participating banks.
http://www.reuters.com/article/etfNews/idUSN2631577020080926
The FDIC updated their billing process on Sep 23rd, the same day they secretly put WAMU on the auction block. The seizure was later moved up one day due to a “leak”-- the secret auction was no longer a secret and had been leaked to the press. Though widely discussed in the press, the source of the leak has not been identified.
http://www.fdicig.gov/reports08/08-018.pdf
FDIC Purchase and Assumption Agreement
http://www.fdic.gov/about/freedom/Washington_Mutual_P_and_A.pdf
NOTE: It cites Schedule 3.1a as a list of the assets to be purchased. After someone wrote the FDIC wanting a copy of that list, they then changed the FDIC website indicating that it was a scrivener’s error and no 3.1a document exists. It appears there is NO LIST of what was included in the purchase.
Statement of Assets & Liabilities in Liquidation (unaudited) FDIC document
It should be noted that the value placed on Washington Mutual Bank varies widely, depending on the source. The figures cited by the FDIC are noted to be "unaudited".
http://wmish.com/docs/WaMuReceivershipFinancialStatements(unaudited)thru123108.pdf
JPMorgan divulges they knew about the seizure Sep 19th, and it actually sounds like the “deal was done” before the auction began.
Investor’s Day 26 FEB 2009 08:30
Charlie Scharf (JPMorgan) said, at their Investor’s Day Conference, they were notified about the bank seizure on Sept. 19, 2008. Fast forward to 3 hours 14 minutes to hear the following excerpt:
"We did a lot of work over a long period of time...really analyzing the company, and then when the deal got done, it happened very very quickly.
Got the call from the FDIC on a Friday (9-19), they came to meet with us on a Monday (9-22), the deal was announced Thursday night (9-25). the deal was announced Thursday night, that night as Mike mentioned Rick raised $11B of capital, and then Friday morning, Todd was in California and Gordon was in California, different places cause uh Irvine vs. San Fran.
I was out in ah Seattle, Frank came out to Seattle, J (Dimon) was out in Seattle, the place…you know it was ours the next day...very, you know non traditional transaction with immediate ownership"..."the business was seized by the FDIC" -- Charlie Scharf, Chief Executive Officer of Retail Financial Services.
Charlie Scharf Speaking:
http://tinyurl.com/bte8qq
A little known fact is that Washington Mutual had $50 Billion cash available from the secondary Fed Reserve Window in San Francisco. One must wonder whether the OTS and the FDIC knew about this. It is apparent the FDIC did not know about the $4 Billion dollar deposit, as they later tried to claim it in bankruptcy court. JPM also tried to claim this money in court. The court determined the money belonged to the parent company, Washington Mutual Inc. (WMI).
http://www.kccllc.net/documents/0812229/0812229081009000000000002.pdf
It appears JPMorgan may have known well in advance of the plans for seizure (by some reports three weeks in advance). It is unknown whether the other banks were also unofficially informed of the seizure, well in advance. Was the auction a fair playing field? Did all the bidders have the same information JPMorgan had?
Washington Mutual was not aware of these backroom discussions between JPM and the FDIC. In fact, Washington Mutual, through Goldman Sachs, was trying to sell the bank on the open market to those very same banks, but curiously their attempt drew no bidders.
Why would a bank bid openly with Washington Mutual when they knew the FDIC was offering a deal, behind Washington Mutuals back for only the choicest assets instead of the entire bank? The FDIC was offering a much better deal, then Washington Mutual was able to offer, you see the FDIC offered the bank for the price of $00.00. Their behind the scenes discussions interfered with the banks ability to sell itself.
Did JPM know three weeks prior to Sept 25 of a possible FDIC seizure? Was the bidding process fair and impartial? That is an issue for a Congressional Hearing to decide. The entire matter is currently under a clandestine investigation. Many shareholders have contacted their Congressional Representatives requesting an open Congressional Hearing on this matter. In most cases they have received no response from Congress.
Sheila Bair said, shortly after the seizure of Washington Mutual, the seizure was stepped up due to a leak. “Washington Mutual was on the radar for some time, said Bair, who noted that the timetable for the seizure was bumped up due to a potential media leak. She added that all deposits, both insured and uninsured are covered.”
http://www.economicnews.ca/cepnews/wire/article/126804
But here she says it was stepped up due to its deteriorating condition. She said that “the bank’s rapidly deteriorating condition prompted regulators to seize it Thursday, and not on a Friday as is typical for bank closures. “ Which is it Ms. Bair? On the date of seizure (earlier in the day than the bank was seized), CNBC aired a short news clip about a bank run they identified as Washington Mutual, and then “broke” for commercial. When they came back online they noted that the previous story was inaccurate, and the bank run was at a different bank (Indy Mac?).
http://www.nytimes.com/2008/09/26/business/26wamu.html?_r=1&ref=us
News stories often report that Washington Mutual was seized after withdrawals of $16.7 Billion over a nine day period which began on Sep 15th. As we now know, there were plans to seize Washington Mutual before the 25th. In fact, JPMorgan was notified Sept 19th about the seizure, and indeed knew about the prospects for seizure three weeks in advance. No information has been released regarding the situation at the time the OTS began making plans to seize the institution.
http://www.huffingtonpost.com/2008/09/25/jp-morgan-to-buy-wamu-ass_n_129451.html
Later, Paul Kanjorski stated on national television that there was a $550 Billion drawdown in the market at this time. What effect did this have on the seizure of Washington Mutual?
The “Economic Meltdown”
09/18/08: It has recently come to light that on the 18th of September there was a 550 Billion dollar drawn down on money market funds during a 2 hour period, and there was panic among regulators
(Frontline--PBS). This indicates that most, if not all, banks were under significant pressure at that time. There is much discussion about the veracity of this statement by Paul Kanjorski.
http://tinyurl.com/cur3nl
http://online.wsj.com/article/SB122869788400386907.html?mod=todays_us_page_one
Why was Washington Mutual singled out when this draw down was occurring at all banks? There was a systemic country wide financial meltdown; why was WAMU seized? Washington Mutual was liquid and well capitalized. The seizure was unjustified, premature, and unwarranted.
The FDIC arranged a similar transaction in the case of Citigroup's acquisition of Wachovia for $2.1 billion. It was in the form of a forced sale, under the threat of seizure. The agreement reached would have required federal assistance to mitigate risk to Citigroup. However, Wells Fargo offered $15 billion to purchase Wachovia outright shortly thereafter despite Citi's signed deal. A legal battle ensued, the FDIC maintained that it stood behind Citigroup and the deal it had brokered, but Wells Fargo was the eventual victor due to their superior offer.
http://online.wsj.com/article/SB122303190029501925.html
http://northcoastinvestmentresearch.wordpress.com/tag/wfc/
Perhaps the differentiating factor was the fact that the sale of Wachovia was done publicly, over a period of a week or more, rather than secretly over a period of hours, as the WAMU "deal" had been completed.
Stock market charts show that the day following the seizure of WAMU, the markets took a nosedive. This is thought to be because investors felt they could no longer trust the government, since they had become erratic in their treatment of the banking crisis. The OTS/FDIC caused the very thing it is supposed to prevent: a bank panic. The premature seizure destroyed the value of WaMu's bondholders and stockholders, at the same time destroying confidence in the market. Why invest in any publicly traded company if the government can arbitrarily seize your interest, leaving you nothing, or perhaps pennies on the dollar?
Note the market performance since the 09/25/2008 seizure:
Click on image to enlarge
How J.P. Morgan Raised $11.5 Billion in 24 Hours
http://blogs.wsj.com/deals/2008/09/29/how-jp-morgan-raised-115-billion-in-24-hours/
Three weeks before JPMorgan bought WaMu’s deposits for $1.9 billion, officials at the Federal Deposit Insurance Corporation had called JPMorgan to say that the FDIC was carefully monitoring WaMu and that a seizure of its assets was likely. There have been no news articles indicating that the other banks were notified at that time.
http://blogs.wsj.com/deals/2008/09/29/how-jp-morgan-raised-115-billion-in-24-hours/
Since the seizure, JPMorgan and the FDIC have challenged Washington Mutual Inc (the Holding Company that owned WMB) on tax benefits of writing off its losses prior to the seizure.
http://www.reuters.com/article/governmentFilingsNews/idUSN3025944620081030
01/22/09: JPMorgan objects to having to show what they bought (file claim) by 3/31/09. That may be because they can't; there is no list in the Purchase and Assumption Agreement (3.1a), although the purchase agreement cites there should be. The purchase agreement is incomplete. JPMorgan objected to having to show any claim by the claim filing deadline. Their objection was overruled by Judge Walrath, the judge presiding over the bankruptcy case.
http://www.kccllc.net/documents/0812229/0812229090122000000000001.pdf
Claim against the FDIC
02/05/09: Weil and Gotshal have filed a claim against the FDIC (December 30, 2008). WMI was given $0.00 for the bank, despite a book value well over $20 billion at the time of seizure. The FDIC failed to get a reasonable price, even though they are required by law to maximize the return on the assets seized as well as to minimize the impact to the FDIC fund. There are many differing opinions on what the value of the bank was, but of the sources we could find, none felt the bank was worth a mere $1.9 Billion. JPMorgan got the bank at a substantial discount, as they have documented well in their SEC filings. They even booked a $1.9 Billion gain the next quarter – not a bad return for three months. The FDIC also gave JPMorgan many subsidiaries. Some of those subsidiaries may not have been on the banks books, and in fact may have belonged to the parent holding company, Washington Mutual Inc (WMI). WMI filed a claim against the FDIC's receivership on 12/30/2008. According to a Weil & Gotshal representative, the claim submitted to the FDIC was denied in late January 2009.
Page 9
http://www.kccllc.net/documents/0812229/0812229090205000000000005.pdf
SEC did not do its job; illegal short selling damaged WaMu
7/21/08: SEC bans “naked” short selling in certain financial stocks. Washington Mutual is not included on the list.
http://www.sec.gov/rules/other/2008/34-58166.pdf
http://www.mortgagenewsdaily.com/7222008_Short_Sell_Banks.asp
9/17/08: SEC bans “naked” short selling of all stocks.
http://www.sec.gov/rules/other/2008/34-58572.pdf
9/18/08: SEC bans short selling of 799 financial companies, including Washington Mutual.
http://www.sec.gov/rules/other/2008/34-58592.pdf
General resource on the surrounding economic legislation and SEC and FED actions:
http://www.philadelphiafed.org/payment-cards-center/legislative-update/2008/3q/
Did the FDIC do their job properly after the seizure of Washington Mutual?
Sheila Bair, in a 60 Minutes episode which aired on March 8, 2009, said that the FDIC did not shutter big banks. Washington Mutual was a big bank and the fallout from its seizure was widely felt in the US markets and indeed around the world. Stockholders were essentially wiped out in this seizure, due to the fact that the FDIC permitted the deal to be written with no regard to provisions for the stockholders. Although it is unknown exactly what the total losses were, it is estimated it could be as high as $30 billion. Many of these stockholders were Pension Funds, large institutions, as well as individuals 401K's, IRA's and other private accounts. The question at this point is whether the FDIC acted appropriately in only getting 1.9 Billion dollars, and allowing the stockholders to be left out of the transaction, and completely out in the cold. Many institutions were severely impacted by the sale agreement the FDIC arranged. The sale agreement had far reaching, adverse effects both on portfolios and the market in general.
9-17-08: A WSJ article states that WaMu has hired Goldman Sachs to find a buyer of the bank.
9-18-08: WaMu's rating slips to a 4 and is placed on the FDIC's watch list, a fact kept secret at the time to prevent a self-fulfilling run on the bank. A 4 rating reflects financial, operational or managerial weaknesses that threaten a bank's financial viability.
9-19-08, Friday: FDIC talks with JPM about WaMu. (From JPM presentation on 2-26-09)
9-22-08, Monday: FDIC meets with JPM. (From JPM presentation)
9-24-08, Wednesday: 4 banks reportedly submitted bids/plans to FDIC by the deadline set by the FDIC:
FDIC Chairman Sheila Bair told reporters on Thursday that after an open process to find a buyer failed, the agency turned to its secretive auction process in which bidders place their offers on a secured website. The auction turned out to be not so secret when a media leak prompted early seizure of the bank. The "leak" has not been identified.
Which other organizations bid for WaMu, and the contents of those bids, have not been revealed by the FDIC. Here is an abbreviated timeline of what happened.
9-24-08, Wednesday 6:44PM: JPM submits bid to FDIC of $1,888M
9-25-08, Thursday: OTS seizes WaMu and gives it to FDIC
9-26-08, Friday: FDIC sells WaMu to JPM for $1,888,000,000.
2-26-09: JPM states that the WaMu transaction was 'very non-traditional'. (From shareholder presentation).
Did the FDIC do a fair and impartial auction?
Were all banks given the same information at the same time? By some reports JPMorgan knew of the auction 3 weeks prior. Did other banks have that same advantage? JPM was notified on Friday, 9-19 that they would get the bank. That was days before the auction officially began. Of note, JPMorgan raised approximately $11 Billion for the purchase, yet they managed to buy the bank for a mere $1.9 Billion. The auction permitted the banks to bid $0 for the bank, and totally disregard the stockholders and bondholders. Although stockholders and bondholders are not technically the FDIC's responsibility, was it wise or fair to totally disregard the interests of these stakeholders?
FDIC regulations as quoted from their official website:
http://www.fdic.gov/regulations/laws/rules/1000-1220.html#1000sec.11d
12 U.S.C. 1821(d)
13) ADDITIONAL RIGHTS AND DUTIES.--
(E) DISPOSITION OF ASSETS.--
(i) maximizes the net present value return from the sale or disposition of such assets
(ii) minimizes the amount of any loss realized in the resolution of cases
(iii) ensures adequate competition and fair and consistent treatment of offerors
How Did JPMorgan Chase (JPM) Profit from the purchase of WaMu's banking assets for $1.888 Billion?
JPMORGAN CHASE Acquires the deposits, assets and certain liabilities of WASHINGTON MUTUAL’S banking operations
http://tinyurl.com/aq3v4w
JPM's Bid For WaMu via FOIA Request
http://wmish.com/docs/gib/JPMorgan_Bid_September_24_2008.pdf
What Did JPM Purchase?
It is still not clear exactly what JPM purchased from the FDIC on 09/25/08, because their Purchase and Assumption agreement didn't disclose exactly what was sold, other than as stated in paragraph 3.1, "...all of the assets (real, personal and mixed, wherever located and however acquired) including all subsidiaries, joint ventures, partnerships, and any and all other business combinations or arrangements, whether active, inactive, dissolved or terminated, of the Failed Bank whether or not reflected on the books of the Failed Bank as of Bank Closing." This statement clearly did not address the possibility of joint ownership of assets by Washington Mutual Bank (WMB) and their holding company, Washington Mutual Inc. (WMI). The seizure of assets which were not on WMB's books leaves open the real possibility that some of those assets actually belonged either solely to WMI or were owned jointly and as such were not rightfully seized.
It appears that that Schedule 3.1a had been intended to be more specific regarding the assets sold. This section is missing, despite being referenced repeatedly in the version of the document posted initially on the FDIC's website.
http://www.fdic.gov/about/freedom/Washington_Mutual_P_and_A.pdf
An early rough draft was obtained by FOIA request:
http://wmish.com/docs/gib/Washington_Mutual_Bank_Closing_Book.pdf
What Did JPM Gain?
JPM had long coveted WaMu's West coast branch network, and had earlier offered $8 per common share for the entire company, an offer that would have assumed all debt and preferred stock of both WMB and WMI. It was rebuffed at the time for being too low; it was less than WMI common stock's market price at that time.
Through the seizure and acquisition, JPM expanded its' banking footprint into states with little Chase coverage. These include Washington, Oregon, California, and Florida. Along with $307B in assets they acquired $188B in deposits, 2239 branches, 4,932 owned and branded ATMs, and 43,198 employees.
They were also given the ability to return any branches they didn't want to the FDIC. JPM has indicated it would lay off 9,200 employees and recently indicated they would cut another 2,800 positions through attrition; the cuts total nearly 30% of WaMu's employees. Included in the purchase price was $1.5B of real estate or other assets (JPM's 10K, 12/31/08, p 82) and WMB's credit card business.
JPM's 10K, 12/31/08
http://www.secinfo.com/dsvr4.s3xf.htm#1stPage
Listed figures are as of 06/30/08 as stated in the OTS fact sheet below.
http://files.ots.treas.gov/73002.pdf
WMB's credit card business had been expanded on June 6, 2005 with the purchase of Providian Financial for $6.45B. JPM assumed both the WMB and Providian credit card subsidiaries along with all other subsidiaries of the bank. $10.6 Billion in credit card receivables were included.
http://en.wikipedia.org/wiki/Providian
JPM's Loan Portfolio
JPM stated in their conference call on 09/25/08 that the transaction would be, "Accretive immediately, 50 cents" (per share), and that it would result in a "Net cost savings (of) $1.5B, conservatively." "$176B (of) home loans (were) assumed", with "$30.7B losses projected."
http://wamucoup.com/JPM_telecon_all.wma
"Just shy of $300B of assets" were assumed, with net assets of $31B after deducting liabilities. JPM then stated they would mark down $31B related to the loans. Coincidence? JPM can use those write downs to offset $31B in profits, resulting in a significant tax savings. At a 35% tax rate, (general business tax rate) this represents a tax savings of approximately $10.85 Billion.
When asked about loan losses if the economy were to worsen, JPM stated that even under the pessimistic assumption if the loan losses exceeded expectations, the worst they would do would be to end up flat. Why? Due to the fact that the other WMB assets would still be making money. JPM stated, "This transaction's generating $12B of capital over the next 3 years.” (That is after taxes.) The WMB acquisition would result in, a "stable, predictable earnings stream" due to retail customers.
JPMorgan Chase acquired the banking operations of Washington Mutual Bank for $1.9 billion. The fair value of the net assets acquired exceeded the purchase price which resulted in negative goodwill. In accordance with SFAS 141, non-financial assets that are not held-for-sale were written down against that negative goodwill. (Negative goodwill is a positive gain on a balance sheet due to gains that cannot otherwise be accounted for.) The negative goodwill that remained after writing down non-financial assets was recognized as an extraordinary gain."
JPM 10K for 12/31/08; p 26, note (d)
http://www.secinfo.com/dsvr4.s3xf.htm#1stPage
“Effective September 25, 2008, JPMorgan Chase acquired the banking operations of Washington Mutual Bank for $1.9 billion. The fair value of the net assets acquired exceeded the purchase price which resulted in negative goodwill. In accordance with SFAS 141, non-financial assets that are not held-for-sale were written down against that negative goodwill. The negative goodwill that remained after writing down non-financial assets was recognized as an extraordinary gain in 2008.”
After writing down part of the negative goodwill, JPM recognized an extraordinary gain of $1.9B. Without this extraordinary gain due to Washington Mutual, JPM would have reported a loss for the quarter.
FDIC accounting report on receivership detailing assets transferred
http://wmish.com/docs/WaMuReceivershipFinancialStatements(unaudited)thru123108.pdf
JPMorgans hedge fund was amazingly unscathed by the economic turmoil. Good trading sense or is there more to it?
http://www.huffingtonpost.com/2009/03/03/jpmorgan-derivatives-5-bi_n_171312.html
So to sum it up, JPMorgan Chase acquired a massive branch and credit card network that augmented their footprint in areas where they were weak. For $1.9B, they acquired 2,239 branches in lucrative markets that would have cost many billions to construct themselves. They obtained an immediate $1.9B financial gain on the transaction, have a future tax savings of $10.85 Billion, and expect to make an additional $12 Billion in after tax profit over the next three years. And after that they are left with a profitable bank that will continue to generate billions of dollars of profits every year for the foreseeable future.
The question remains. Was this a fair auction? Did government regulators do their jobs properly? Was Washington Mutual fairly compensated for its bank?
Should Washington Mutual have been seized at all?
You be the judge.
The full and final price on top of the initial payment will be the price of book value for every asset jpm got in the fdic "auction" of wmb . Maybe plus 6 years interest .
You can find proof of this in the documents . I will search for it later .
These assets are worth billions imho .
On top of that are all the assets of wmi wmifsb etc which are sitting in the dark at the fdic ... These assets have to come back to the escrow holders eventually , especially since the fdic-r is not released .
I think we will see that happen anytime between now and 2018 .
you did not answer .
but again ... do you have your hands on any actual documents that show some proof for your statements that jpm bought the loans ?
anything more than a simple statement about that all is already discussed ?
show me .
how fun !
can you explain why jpm did not report on these loans for 6 years ?
the correct answer also contains billions for us .
everybody !
i now ask the whole board .
why do you think the fdic-receivership is still not released as of today after the 2 month mediation with susman godfrey and the resulting por 7 ?
i ask this specific question because the right answer contains billions over billions of wamu assets that may or may not are going our way . as it was planned in all previous pors ... now with por7 including retail .
fdic-r not being released is where we should look at .
everything else is smoke .
is asked you a simple question and you can not answer .
if you can not do that then either admit that you can not or do not answer . thank you .
proof ?
not when it says washington mutual mortages on it .
they are servicer and not the owner of these mortages
you are right ... and since when are unaudited wmilt sec filings are a source of credible information ?
since the fdic-r is still not released all of the "old" informations and documents are not still very much "uptodate" .
if jpms 10k do not show wamu assets ... then explain this :
http://www.secinfo.com/dJ5e.m8v.2a.htm#1stPage
it shows tens over tens of billion dollars of wamu assets ...
78b repaid mortages .
49b liquidated mortages .
38b remaing mortages .
you say there are no wamu assets in jpms 10 k ?
i think 165 billion in wamu assets are an argument backed by jpm 10k against your made up lie .
it seems you are kind of spreading incorrect information on this board ...
if you say your postings are verified ... then please do verify your postings with actual documents instead of just saying that your postings are verified because you say so ... thats a little weak argumentation from your side .
again you do not need to respond to this .
anytime between now and 2018 .
statements that are not backed by proof are not credible.
i find it kind of funny that nobody of the negative posters can tell why the mediated results of por 7 does not include a release of the fdic-r .
if the fdic-r has to give back all assets that they may have or may not have and jpm has to pay book value for all assets they got ...
escrow holders will do very well .
can you explain why the non release of the fdic-r is part of "fair and reseasonable" ?
can you please verifiy your statements ?
no the por 7 leads me to the conclusion that the fdic-r is still not released .
that jpms 10 k shows billions over billions in wamu assets is just ...
very interesting .