Mr Cooper Group Inc (COOP): From yahoo by vivanbalbo... // Morere...

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Sunday, 07/12/2009 5:03:15 AM

Sunday, July 12, 2009 5:03:15 AM

From yahoo by vivanbalbo... //

Morere about the question ...4B: deposit or capital contribution? -> which is the core of the 4B litigation.

------posted in yahoo ----------
By the way, another thing to consider regarding JPM's argument that the $4B was "intended" to be a capital contribution to WMB and therefore belonged to WMB rather than WMI:

On the face of it that argument looks to be plausible, since WMI did get a $10B cumulative capital infusion by selling securities in late 2007 and the TPG deal in spring 2008, and it would appear that the $4B in question mainly came from those sources. (It certainly wasn't from profits kicked upstairs by subsidiaries, because there weren't any.)

But (1) from what we've seen of those transactions it is not apparent that WMI was "required" to immediately make a "formal" commitment of those funds to the core capital of WMB, and (2) WMI didn't need to do so because WMB was NOT illiquid and WAS "well capitalized" under OTS standards and was NOT given a warning/demand letter by the OTS to increase capital! Moreover, having the money on deposit at WMB (rather than some other place) added to WMB's liquidity in a practical sense, and on 9/24/08 it hadn't even been 4 months since the TPG group kicked in its contribution. What's more, from reading some of WMI's recent briefs (can't say exactly where I saw it), it appears there WAS normally a formal process by which WMI made capital contributions to WMB, and that that process was followed with respect to some of the capital contributions made earlier in the year, but that there was NO such formal paperwork transferring the $4B in question to WMB as a capital contibution.

So, if WMI never formally turned over the money to WMB as a capital contribution, and JPM can't prove otherwise (and JPM has the burden of proof on this issue), then JPM has no legal standing to beef. It was all WMI's money to begin with, to do with as it wished, not WMB's. Maybe TPG and other investors would have standing to complain, but not JPM.