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zulual - FDIC on why did they have to pay?
Because the FDIC provides insurance coverage for each depositor up to $ 250K limit.
Yes the FDIC did not lose any money. Reason - they filed a depositor claim against the WMB estate held in receivership by the FDIC-R. Note the FDIC and FDIC-R are two separate and distinct government agencies.
Here is what likely happened:
WMB was sold / stole acquired by JPM. Your deposit account was delivered up to the limit of $ 250 K by the FDIC insurance coverage. Now, since you were made whole you had no claim. Your happy and no need to file a claim to get your money back. But since the FDIC had to pay you your money and those of other depositors up to the $ 250K limit they need to be reimbursed. So in essence what they did was stepped into your / other depositor shoes and file for reimbursement via a "Depositor Claim" for insurance coverage funds to the tune of $ 151B.
I will not get into it here but one can get protection of $ 250K limit for various types of ownership accounts. Because WMB was solvent no depositor would have loss funds that exceeded the $ 250 limit.
cura asada - Transparency ??
Never in my life time would I have imagined to see a Corp Bankruptcy filing with such mystery.
WMB was a great establishment with an outstanding financial reputation. To see it tarnished in such a manner is disheartening.
Market Reputation:
The shear volume of asset backed secritization programs is very telling. Investors had confidence in the soundness of WMB - credit worthy / programs collateral.
cura asada - $ 151B FDIC claim.
My read on this -
FDIC filed and got paid from the WMB estate. Reason they most likely paid the "Insured Depositor" their $ 250 K Insured Limit per account based on SS#. But no more than $ 250 K per SS#.
Since FDIC paid and then filed to get reimbursed.
Large Green - Thank You!
Just keeping it real. Making contributions based on common sense and my business acumen of accounting and banking.
Again Thank You!
onco - Trigger Event / Point!
My point:
I believe WMI had/has ownership interest in a majority of the securitized trust programs. The trigger point would be the each programs ending. Thus, as each program reaches maturity, vis a via, all certificate holders, (i.e., investors) are respectively paid, then WMI will have access to the residual balances.
These ownership interest would be both a cash collateral and cash investment account provided by WMI and tied to the trusts as credit enhancements.
cura asada - $ 151B
JPM Link you sent to me.
Previously you asked for my take of the $ 151B going to the FDIC-R. Sorry for missing that item. As I revisited Page 13 I do not see how you would come to that conclusion. All I see is a reduction of deposits of $ 151B deposits.
Instead of FDIC-R did you mean Federal Reserve Bank? Because, if Federal Reserve Bank, routinely Banks will borrow or lent deposits to the Fed.
Only time I could imagine JPM would sent money to the FDIC-R would be due to a settlement. If so, there would be a settlement agreement and the settlement funds would be wired.
Unsure about the mixture; $ 37B of $ 188B were medium and long term deposits that were used for loans.
cura asada - $ 220B reduction - non operating deposits
Banks, pre 2008 crisis, were mainly managing asset to liability. But since then new liquidity regulations were put forth, specifically the focal point was to ensure protection against a run on bank deposits.
What transpired was a new threshold emphasizing types of deposits and deposit mix. This new regulation to classify deposits into operating vs. non operating.
The short of it - banks have to protect against the non operating with highly liquid assets which are not favorable because they inherently have a low yield. So, today banks are focused on deposit mix with the goal to have minimal non-operating deposit vs operating deposits. Operating deposits are those that have a longer than 30 day maturity which banks can then leverage toward higher yielding assets.
This $ 220 reduction of non operating deposits was in my opinion JPM lowering their liquidity risks in the normal course of managing the deposit mix.
BBANBOB, -
I hear ya. But with the decline in the real estate market homeowners took advantage of this and refinanced their mortgages. Because of this the securitized collateral pool was being replaced with lower yielding mortgage loans.
clawmann - servicing rights.
You are asking - When should there be a recognized accounting via a separate line item for servicing rights.
Commentary:
This is a area that is based on a few different conditions.
1) Financial assets contract must qualify as a true sales accounting treatment.
2) Servicing Rights fees are defined "Contractually Separate" from the Financial Assets Contract. Thus not bundled within the Financial Assets contract.
3) The fees for the Servicing meets a so called "more than adequate" compensation vs. the normal market rate.
If all the conditions above are meet then yes servicing rights qualify for separate accounting recognition based on the Net - fair value of servicing cash in-flows (fees ) vs. cash out flows (administration).
BBANBOB - What can 40.2B generate?
Depends on the contractual revenue % of each agreement.
One can only imagine the cash war chest that is housed within the banking accounts of each respective securtized program. And, while these programs do not dissolve each has a trigger event of when $ flow to WMI or affiliated entities.
JusticeWillWinn - Focus Point!
I contend the $ 40.2B does not belong to WMB and must come back. As it was not included with the $ 272.3 Total Liabilities Line under Inception Balance Column
Focus Point:
Total Liabilities Line $ 272.3B vs. $ 13.7B ( Inception Balance Column vs. Current Balance Column. Reason for 13.7B as current Balance is that Net Assets ( Inception Balance Column ) of Plus $ 26.4B did not include 40.2B within the $ 272.3B Total Liabilities.
Proof - Plus $ 26.4B less <$ 40.2B> = <13.7B > rounded. Note the line item of Liabilites at inception unproven. The $ 40.2 was discovered as not belonging to WMB and therefore the 26.4B Plus Net Assets should have been a negative $ 13.7 Net Asset Deficit.
boarddork - Certificate Income
Yes - FDIC has no right to keep assets from a true asset sale from a securitzation transaction. That is why, I believe the 42.2B was removed from the Real Estate Mortgage Line item.
To further reflect insulation / protection of assets both WMIIC and WMI filed to distance their assets from creditors of each other and likewise WMB. It is not uncommon for a court to try to reclassify sale transactions as merely financing agreements. Thus the double protection with both WMIIC and WMI filing.
As for Certificate Income, I believe all SPE's that meet true sales criteria hold a bundle of cash not belonging to WMB but ultimately due to WMI. And because status of these transactions are bankruptcy remote FDIC holds no repudiation powers over them.
Clawmann - 42.2B effect
Clearly the reduction of 42.2b reduces the available assets from the FDIC water fall. Trustee of FDIC now has less potential liquidation funds for WMB Creditors.
FDIC must comply with GAAP and in doing so removed / derecognized what contractually WMB did not legally own or have control over. WMB no longer having a legal ownership would not be entitled to any future cash flow and or over collateralization of true sales transaction.
??? To whom transferred. Since 42.2B were earmarked Mortgage Real Estate Loans most likely to bankruptcy remote SPE's. ??? what $$ amount of revenue might this 42.2B generate?? And more importantly what lies within all the SPE's that WMI had a contractual retained interest. Since each SPE has it's own banking account respectively they could be a boat load of $$ generated and parked just waiting for a trigger event. Also what other real estate owned that collateralized true sale securitzed pools remain to be liquidated. It is with all of these that LT can go after.
Hotmeal - Spot on!
Ref: Adjustment of 42B reduction from the 191B of Real Estate Mortgage.
I would give your analysis of the 42B adjustment a high likelihood of a unrecorded true securitized sale.
From doing call reports and auditing banks I have encounter many forms of ;impropriety. Impropriety such as transactions; not in compliance with GAAP, lacking in completeness, wrong accounts, amounts, dates or ones which have never been made.
Some discoveries have been very material. Often they are more prevalent when dealing with intercompany or complex accounting transactions.
Once again I believe you hit the nail on the head with this one. And, thus the reason for the true up to remove from the consolidation.
40.2 Billion Asset Related Equity Adjustment.
Hmmm...so the 191.5 B was overstated by 40.2B.
Per Asset Related Equity Adjustment Note 8 - 40.2B is a direct reduction from 191.5B. Thus 191.5B is overstated by the 40.2B
My empirical experience gives me the impression this negative 40.2B relates to securitization from a true sale. A true sale in which the 191.5B had the unrecorded 40.2 Real Estate Mortgage Receivable not yet deducted.
Note 8 refers to non cash transactions and clearly "Receivables" are non cash transactions.
To comply with GAAP is the reason the 40.2B was removed. Per GAAP we see the 40.B true-up entry.
In summary - within the 191.5 Billion there was an unrecorded 40.2 amount that met both legal and accounting requirements to be removed from the consolidation.
Mordicai - Equity
Your Quote-
Seems to me the equity of any asset goes with the asset.
Maybe the intend here is to reflect the word equity in reference to ownership interest. Thus the reverse "asset goes with equity as in an owner's percentage of ownership.
nosch - Profit Margin Increased?
Ref: Your Quote
Nevertheless there is one good point IMO. In 2008 and before, the mortgages interests have been around 5% then. Yes that has merit.
My Commentary:
Likelihood of Securitization programs providing a booming increase based supporting pool of loan mortgages being around (5 % in 2008 and before ) vs. spread difference of cash flow to investors as explained below:
Securitization via ( Asset Backed Security Contracts ) were generally set at a fixed rate, or based on an index such as Targeted Fed Funds Rate or Libor Rate plus additional basis points.
In researching the history rate of both Fed Funds Rate / Libor Rate it depicted the following.
Fed Funds Rate - 2008 around 2.25 %. Then 2009 - @ 1.5 % and from 2010 to present 2016 less than .5 % on average.
Libor Rate - 2008 around 4 %. Then 2009 - @ 1.5 % and from 2010 to present 2016 less than 1 %.
While the index rates above declined sharply so did loan mortgage rates. Here homeowners took advantage of this market decline to refinance.
Yes, there could have been a window of increase profit margin ( cash from borrowers of the pooled mortgages vs. yield to investors ) but most likely short lived.
Where I do see a significant windfall is with the retained interest, vis a via, over collaterlization and revenue from % of cash flows both monthly and upon liquidation. This would be in reference to those SPE's that were bankruptcy remote.
BBANBOB,
Maybe residual % is between WMB and WMI. Sponsor was WMB but SPE's Trusts being subs of WMI.
BBANBOB,
You Ref:
1) Company's interests in the statutory trusts do not cause the Company to absorb the majority of expected losses or entitle it to receive the majority of residual returns, if any, "upon the liquidation" of the statutory trusts.
2) These SPE do not qualify for consolidation in the Company's Financial Statements.
Commentary:
Appears based on both # 1 & # 2 the statutory trusts are classified as true sales. Thus off balance sheet accounting treatment - as in removal of loan assets transferred to the statutory trusts. Company's balance sheet would only reflect the retained interest, if any.
Operative words "upon the Liquidation."
This verbage is within # 1 above. Emphasis to the Company not have the "Majority" loss obligation or "Majority" of residual returns, if any, contractually going upon liquidation of trusts?
Residual returns are not just upon liquidation. The structure of each contract can take many forms. One such could be set up so residual returns are a portion / % of future cash flows on a monthly basis. Most likely the entity providing the credit enhancement has the lions share of retained interest in income cash flows.
You Ref:
The statutory trusts' variable interests, including the covered bonds they issued, and the swap and the guaranteed investment contracts into which they entered, collectively absorb the majority of expected losses.
So here we have the SPE;s - Statutory Trusts providing the credit enhancement. I would generally believe it is within each Statutory Trusts there lies a war chest of cash. Question is - to whom gets these spoils?
wwhatthe - You can't be serious!
Your Quote:
I believe it’s the Common Shareholder who will walk away with all the spoils…
$279.6 Billion Dollars
Banks, unlike most entities are measured by deposits vs. assets. Deposits are the "Life Blood" of banks. Deposits come in many forms, such as Time Deposits, Demand Deposits, and even Fed Funds if necessary. Banking is all about asset / liability management. Therefore banks must keep percentage of loans to deposits at a safe percentage. Generally no more than 85 %. If this gap gets higher than Fed Funds are obtained.
Now to book value:
Banks and Savings and Loans are different animals vs non bank / s & l. Here book value is would really be misleading as deposits are the measurement of such entities. Remember deposits are liabilities from which loans are created and the underpinning of such assets. Thus liabilities are to me subtracted. So with banks and s & l we would used "Net Book Value" - Assets less Liabilities.
Net Book Value was @ 28 billion June 2008 as follows -
As of June 30, 2008, Washington Mutual Bank had total assets of US$307 billion, with 2,239 retail branch offices operating in 15 states, with 4,932 ATMs, and 43,198 employees. It held liabilities in the form of deposits of $188.3 billion, and owed $82.9 billion to the Federal Home Loan Bank, and had subordinated debt of $7.8 billion.
I too want to see a great return for all here that have been hurt but lets keep it real!
Yes9 - Assets Retained
A comment in court of such matter strongly suggest there are / will be assets available.
Hmmm... and JPM bought the whole bank!! Then why not claimed by JPM? Are these non WMB assets?
Possible reasons-
1) Assets totally owned by WMI and unknowingly seized.
2) Assets purchased by WMI and transferred to WMB.
In my auditing days I came across numerous Holding Companies that legally owned the assets then would transfer to their operating entities. Now if these assets were contractually set up as financing agreements with redemption clauses along with being consolidated with WMI financials they could be insulated from WMB bankruptcy.
Being the size of WMB this would be a nightmare accounting / auditing task. Discovery of these types of inter-company transactions would involve auditing loads of data among huge lists of spreadsheets.
Also totally owned SPE (s) of WMI could very well have to be audited to unmask the assets seized and not WMB.
clawmann - Ref WMI Claim
Your Question:
Did WMI file a general Creditor claim with the FDIC-R?
On March 20, 2009, Washington Mutual Inc. filed suit against the FDIC in the United States District Court for the District of Columbia, seeking damages of approximately $13 billion for what it claims was an unjustified seizure and an extremely low sale price to JPMorgan Chase.
Is this suit still in play?
BBABBOB - Trust Entities.
I see a long list of affiliated entities. It is possible the Trust Entities such as CCB Capital Trust ones are where buildings & respective lands set.
One way to make buildings & lands off both WMI & WMB books is by the following:
1) WMB originally purchased, then
2) Sold to WMI in as sales lease back, then
3) WMI pooled sales leased back assets as mortgage backed assets by transferring to Capital Trust (s) entities.
4) On WMB books Buildings & Land removed.
5) On WMI books Building & Land removed.
Both WMB and WMI benefit from capital injection. WMB from sale proceeds to WMI and then WMI from proceeds of pooling Buildings & Land as asset backed securities.
In turn WMI would have the Buildings & respective Lands off balance sheets and so called there are the hidden assets.
footballref- Mineral Rights
No I was not referring to Mineral Rights. But this too is an asset that could be fully depleted and show no value. So if WMB or WMI have such property with natural resources while balance sheet reflects Zero $ the actual recovery value could be significant.
BBANBOB - Sale Lease Backs
We know per GAAP Buildings fully depreciated would not be shown on WMB balance sheet. This would be so because of the "Net Book Value" classification.
Buildings do not depreciate so "Yes" if WMI owned the Land and leased to WMB that is one scenario why the FDIC-Receivership Balance Sheet -of WMB does not reflect Land on Balance Sheet.
Another way that Buildings & Land would not be reflected is if WMB did a Sales & Lease back with WMI. WMB originally purchased then sold to WMI under a Sales & Lease back transaction. This is a common practice and benefits the seller (WMB) in getting cash capital injection with off balance sheet financing. Off balance sheet in that they can remove the asset from the balance sheet. Then be able to fully expense rental payments on the Income Statement vs. only the depreciation & any interest payments.
Docsavag - Land WMI owed?
Yes, very possible WMI purchased both land and buildings and leased the buildings to WMB. Or WMB original purchased both land and buildings and did a sale to WMI with lease back.
BBANBOB - Land indefinite life.
Because Land is assumed to have indefinite life GAAP does not allow for any depreciation. Only where there is an estimated useful life such as in land improvements.
Once again as for Buildings I can see how Zero $ could be reflected. Thus the so called hidden assets via the "Net Book Value" (Cost less Depreciation) method of FDIC-Receivership Balance Sheets.
Assets Hidden?
Looking at the WMB receivership balance sheets - both as of 9-25-2008 (failed dated ) & 31 March 2016 there is no line item for Property / Plant / Equipment.
What I find interesting is the following disclosure:
"The book value of assets (cost less depreciation or
amortization through date of the institution’s failure) Buildings & Lands."
This would mean only the "NET" $ value would be reflected.
For example: Buildings that were purchased 30 years or more back from 2008 would have been fully depreciated. So lets say as of 2008 the accumulated total of Buildings purchased were $ 15 Billion and under GAAP depreciation method of straight line the $ 15 Billion would have been fully depreciated. So since the WMB receivership balance sheets are categorizing Property / Plant / Equipment at "Net Book Value" Cost of $ 15 Billion less depreciation of $ 15 Billion = Zero $.
Now what is the Fair Market Value ?? Remember financials are reflected at original cost. So, expect for a fire sale, the liquidation value of based on fair market value could far exdeed the above $ 15 Billion cost.
Of course this is all in compliance with GAAP and one can see why it is possible to have Zero $ not shown for Buildings.
Land is not depreciated. This has me scratching my head as one would believe at least a value would be reflected on the balance sheet.
What would make a Big Difference.
I don't see how knowing the investors, vis a via, certificate holders would amount to a Big Difference.
But I do see value in knowing:
1) Years still left on existing tranches within the trusts?
2) Residuals on existing tranches?
3) To whom are the servicing fees going / legal ownership of existing payments of loans being serviced?
4) If there are any Other Real Estate Owned, (OREO)- Fair Market value of Real Estate foreclosed? Especially properties that were securing the collateral of Trusts. To whom has legal ownership when they are liquidated?
5) Any still to come unwinding of remote SPE? Those not consolidated on the financials.
Point is -
FDIC must make "Whole" WMI for the following:
1) Property that FDIC took possession of which said property that WMB did not own or that WMB was required to return to WMI. Since WMI had legal ownership FDIC had committed conversion - illegal transfer.
2) FDIC sold WMB for substantially less than its liquidation value. Thereby FDIC expropriated WMI’s property and transferred it to JPMC. That expropriation is a taking of WMI’s property for which compensation is due under the "Just Compensation Clause.”
Ongoing debate has been on escrow. Specifically, if they will get paid and if so what dollar amount. My belief - Finalization of settlement will include Due Compensation for property clearly owned by WMI and illegally seized liquidated then given to JPM.
Yes - When?
Ref: Article- An Accounting of the Monetary Value of All WMI Claims Against JP MorganWMI’s cash situation, September 2009 »
Washington Mutual’s Case Against the FDIC: in Its Lawyers’ Words
This past week Washington Mutual, Inc. (WMI) made a filing in the lawsuit against the FDIC in Wash. D.C., their response to the FDIC’s motion to dismiss the suit. In it WMI for the first time spells out publicly in great detail their case against the FDIC. Remember that WMI wholly owned WMB (Washington Mutual Bank, the actual WaMu bank), and it was WMB that was seized away from WMI and sold to JPM for $1.88 billion. WMI is using several legal theories in their arguments, but most come back to WMI’s claim that “the FDIC sold the assets of WMB to JPMC for less than their liquidation value” [fair market value]. The congressional act that regulates the FDIC says it must maximize the value of the seized assets. WMI also claims that the FDIC seized assets that belonged to WMI, not WMB, and is therefore required to be compensated for their value.
The text below is quoted from WMI’s filing on 7/16/09.
WMI “alleges that the FDIC sold the assets of WMB to JPMC for less than their liquidation value. While the FDIC asserts that this claim is merely “speculative,” the publicly available facts indicate that WMB’s assets were worth substantially more than the $1.88 billion JPMC paid. Indeed, in less than one year from the acquisition, JPMC already has recognized a profit from this transaction far in excess of the purchase price. The FDIC breached its irrefutable obligation to maximize the value of WMB’s assets.
Now the FDIC seeks to avoid accountability by shifting the loss onto WMI. The Federal Deposit Insurance Act (“FDI Act”) and the Just Compensation Clause of the Fifth Amendment both require that WMI be compensated for the FDIC’s failure to pay to WMI their portion of WMB’s liquidation value.
As a separate but related issue, the FDIC also took possession of property that WMB did not own or that WMB was required to return to WMI. Because that property was not property of the receivership estate, the FDIC has converted it. WMI also must be compensated for this conversion.”
“The FDIC seeks to have this Court interpret the law in a manner that grants the FDIC unlimited discretion, completely immunizing its actions from any review, and unlimited power to resolve a bank in receivership – without regard to the actual powers and duties Congress provided in the FDI Act…The FDIC’s position is fundamentally lawless and should be rejected. The FDI Act required the FDIC to maximize the value of WMB’s assets for the benefit of WMI and the receivership’s other claimants. The FDIC failed to do so…”
“The FDIC attempts to justify its breach…by asserting that the sale to JPMC resulted in no cost to the deposit insurance fund. Because WMB’s assets were worth significantly more than its deposit liabilities, selling WMB for more than those liabilities was neither difficult nor laudable. Indeed, it suggests a motive for the FDIC’s breach. In the ordinary case, a bank placed into receivership is sufficiently insolvent that its assets are not sufficient to cover its insured deposits, much less the amounts owed to other creditors. Here, however, WMB’s assets substantially exceeded its deposit liabilities, and the FDIC lacked its usual economic incentive to maximize the value of the receivership’s assets. Therefore, the FDIC ignored its obligations to the WMB receivership’s claimants. This Court should not allow the FDIC’s conduct to go unexamined.”
“The FDIC argues that WMI’s allegation that the FDIC sold WMB’s assets for less than their liquidation value is merely “speculative””…but WMI’s “allegations are far from speculative. Immediately after the transaction, JPMC projected that the transaction would add $2.4 billion to JPMC’s net after tax operating income in 2009 alone. JPMC expected the transaction to be immediately profitable…JPMC has recently announced that it is now poised to recognize significant gains (i.e., as much as $29 billion), as it recognizes the actual market value of many of the WMB assets it purchased. Furthermore, JPMC recorded negative goodwill in accounting for the transaction – indicating that, immediately upon consummating the transaction that the fair market value of assets acquired exceeded the purchase price. Such negative goodwill is unheard of in a major acquisition. Indeed, the facts surrounding JPMC’s purchase price are sufficiently suspicious that one U.S. Senator has called for an investigation.
Finally, shortly after WMB was placed into receivership, the FDIC attempted to broker a sale of Wachovia, announcing a letter of intent to sell Wachovia to Citigroup for approximately $2 billion. Wells Fargo announced only a few days later that it was willing to purchase Wachovia for more than $15 billion. The fact that Wells Fargo was willing to purchase Wachovia on terms substantially superior to the original deal arranged by the FDIC calls into question the FDIC’s commitment to negotiating the best price for a troubled bank. Indeed, this episode demonstrates the FDIC’s indifference to its obligation to negotiate a fair market price once the deposit insurance fund no longer stands to suffer a loss.”
“The FDIC has a duty to maximize the value of the Receivership’s assets when it liquidates the Receivership estate. The FDI Act specifically commands the FDIC to maximize the value of such assets. (“When a depository institution fails, the FDIC has statutory responsibility to the creditors of the receivership to recover for them, as quickly as it can, the maximum amount possible on their claims.”)(“When an insured institution fails, the FDIC is ordinarily appointed as receiver. In that capacity, it assumes responsibility for efficiently recovering the maximum amount possible from the disposition of the receivership’s assets…”.)”
“The FDIC argues that it is not so obligated because the FDI Act requires the FDIC to seek the “least cost resolution” of a failing bank…[however,] maximizing the value of the receivership estate enhances the likelihood that the FDIC will recoup the loss to the deposit insurance fund and is therefore consistent with the “least cost resolution” of a failed bank.”
“Even if the FDI Act did not provide WMI with a direct right of action against the FDIC, WMI still may recover damages from the FDIC under the theory of illegal exaction. An illegal exaction is money that was “improperly paid, exacted, or taken from the claimant in contravention of the Constitution, a statute, or a regulation.”…The FDI Act obligated the FDIC to liquidate WMB’s assets for their maximum value, and then distribute the proceeds to WMB’s creditors (such as WMI)…Rather than paying the liquidation value owed to WMI under the FDI Act, the FDIC transferred that value to JPMC. By doing so, the FDIC illegally exacted money due to WMI.”
“The FDIC sold WMB’s assets to JPMC for less than their liquidation value. One might presume that the FDIC believed that the sale of WMB to JPMC for less than its liquidation value served public policy in some way. However, whether the FDIC had a valid public policy rationale for the JPMC sale is not the issue. Rather, the issue is whether the FDIC can force WMI to bear the loss, notwithstanding their property interests in WMB. To accomplish the JPMC sale, the FDIC sacrificed WMI’s liquidation rights, shifting money that they would have received to JPMC, to accomplish whatever public policy goal the FDIC thought the JPMC sale served. The FDIC must compensate WMI for the property that it took – the difference between the liquidation value of their property interest in WMB and the fraction of that value that actually will be paid due to the P&A Agreement’s sub-liquidation purchase price.”
“As the FDI Act itself recognizes, the creditors and shareholders of a failed bank continue to have a property interest in the liquidation of the assets of the bank…The receivership process, similar to the bankruptcy process, is a system to allocate the remaining assets of the failed bank among the claimants of the failed bank…(“As receiver for the failed bank, the FDIC acts much like a trustee in bankruptcy, marshalling the assets and legal interests of the bank and distributing its assets to creditors, including the bank’s depositors.”). When the FDIC sold WMB for substantially less than its liquidation value, it expropriated WMI’s property and transferred it to JPMC. That expropriation is a taking of WMI’s property for which compensation is due under the Just Compensation Clause.”
“For the foregoing reasons, Plaintiffs respectfully request that this Court deny FDIC-Receiver’s Partial Motion to Dismiss and FDIC-Corporate’s Motion to Dismiss.”
bkshadow - Thank you!
2009 was year of carryback revision. Time flies.
bkshadow - $ 24B Investment
Thank you for the explanations. Tax regulations have many requirements that must be strictly followed. WMI had to be very careful not to be hit with fraudulent conveyance upon the abandonment.
I do recall the tax code ( prior year "NOL" usage ) being changed from two years to five years in 2011.
Got it...thank you!
$8.37B WMB Worthless Stock Loss on...
Ok, then -
From what you reflected the above $ 8.37 was the total usable Tax Loss. This was from a $ 24 B "Realized Investment Loss" on books.
So was the difference - $ 2.4 a "tax refund" applied toward prior tax years, ( $8.37 vs. $ 5.97B )?
This would make sense and WMI followed the accounting regulations of consolidation therefore "deferring worthless stock treatment / abandonment."
Ref: $ 20 Billion
Like I referenced:
If deferred then the cost of investment ( amount paid by WMI of WMB stock ) would still have been listed on WMI's financials as an asset upon bankruptcy filings. The could be the case if WMI followed the accounting requirements of consolidated.
or
If not, then cost of stock paid ( WMB Investment ) would have been deducted from the assets of WMI books, vis a via write-off of investments - Balance Sheet entry credit and corresponding Income Statement entry debit for realized loss on investments.
Worthless stock - $ 24 Billion?
Pertaining to WMI's bankruptcy filing:
There are sounds reasons for WMI to claim a worthless stock deduction.
Reason to claim:
Once WMB filed bankruptcy the parent WMI could have de-consolidated WMB from its financials and taken a worthless stock deduction. Benefit to WMI as follows:
1) Tax operating loss. Back in 2008 a tax loss allowance could be applied back two prior years for a refund or forward twenty years to offset tax liabilities.
2) A tax sharing agreement for refunds % wise benefits WMI vs. WMB.
Good reason to believe the $24 Billion was not stock related. But also a slight chance the stock investment of WMI in WMB was deferred until WMB stock was cancelled. If this was the case then per consolidation regulations a company would defer.
Assets: $ 32 Billion Debit $ 8 Billion.
Ref: Purported asset figure inflated due to inclusion of stock value prior to seized.
Stock generally in Equity Section of Balance Sheet. I only know of one way asset section would include stock. This would be by an entry known as Stock Subscriptions Receivable. Here a contractual agreement is signed by investors or employees to buy stock at future date. Price is generally that of market value or slightly lees on date agreement was signed. If any non executed agreements existed then yes assets would have been overstated.
Debt:
The $ 8 Billion could have been understated if any off-balance sheet transactions were not present. If so then WMI would have had no legal ownership or controlling rights with affiliated SPE's. Then again what capital assets / reserves within SPE's left off the asset section.
Assets: $32 Billion.
This could also have been understated. If a significant % of assets were Buildings & Land they would have recorded on Balance Sheet at historical cost. If they were purchased at least 20 years or more prior to 2008 the fair market value would be way much higher than the recorded historical pricing.
Liquidation of these assets would "not" have been at fire sales prices. Fiduciary duty with chapter 11 reorganization would have been for maximizing gain.
What is known of any liquidation here.
I am not concerned with WMIH Financials. I would in fact expect their financial footnotes to disclose not having obligations, assets, or liabilities which would be considered off-balance sheet arrangements.
It's WMIIC which is most likely the sponsor of SPE's. The court assigning a trustee to carry on with the operations is telling. Why? Mostly likely continued operations. Continued involvement would reflect the need to manage existing contractual obligations:
1) Asset management, monitoring and reporting of servicer performance data
2) Collection / movement of cash flow.
3) Any other necessary fiduciary / legal obligations /actions to preserve SPE's interest of equity holders.
Continued operations transcends to continued revenue generation.
There are a lot of controversial issues being discussed. It's my position that the assets / cash revenue within respective QSPE's will be consolidated and moved to WMI as capital injection - accounting entry as "Additional Paid in Capital." Then escrow markers exchanged for a percentage of the APIC.
In the wake of all that has gone on over the years this would make sense both from a come clean manner, (i.e., uncover what was covered) and repair financial health to those whom were harmed.
Based on activity / circumstances over this past year We are most likely down to the stretch run.
W3Research - Hours, days or a few more months?
WAG on the time frame is all my respond would be. So, it would not be prudent to even go there.
What I am willing to say from the huge monthly $ amount of the expenses, namely billing, within WMIIC there must be a large war chest of cash flow. Knowing the banking / savings industries without any reservation huge amounts of revenue were generated from administrating / servicing securitization entities. Yearly, it would not surprise me if hundreds of millions generated.
WMIIC is in the process of being dissolved. What is the motive here - to me not big deal....as it has served its purpose. I am more interested in the value of all existing SPE's. The ones were I believe the combined values - hard assets / cash will eventually be transferred to WMI. Transfer would take on the accounting treatment of "Additional Paid in Capital (APIC )." After this additional APIC escrow shares will be exchanged for perferred shares for a percentage of the addition instant valued created. Hmm... maybe that is why such an interest by the big boys "Hedge Funds".
Retail might be happily surprised how well this turns out.