"WMI sent a letter in Aug. to the OTS that stated they were going to dwonstream 20 Bil in cash to WMBfsb. The letter stated that it would decrease their capital liquidity ratio, but keep it way above the min 8% required.
Money was being moved from WMB to WMBfsb, because the Board was told by their legal representatives that WMBfsb would be safe from FDIC and would not be part of a sale."
Your statements appear to contradict Doreen Logan's affidavit which says that WMB fsb was overcapitalized and that an application was filed with the OTS to transfer 20 billion of excess capital out of WMB fsb to Pike Street Holdings Inc.
Am I in error?
Washington Mutual Sought Regulatory Approval To Reduce WMB fsb'sCapital Base By $20 Billion - Which Is Inconsistent With Any Notion That There WasAny Intent During The Same Time Period To Increase WMB fsb 's Capital By $3.674Billion. For months prior to the September 2008 transfer of the $3.674 billion deposit,the Treasury group of Washington Mutual had proposed and planned to decapitalizeWMB fsb by transferring $20 billion in excess capital from WMB fsb to Pike StreetHoldings, Inc., its direct parent entity. The plan to move the $20 billion is reflected in (a)the August 14, 2008 memorandum from WMB's Senior Vice President - Funding &Capital, Treasury, Peter Freilinger, to the Board of Directors of Washington Mutual Bankfsb, and (b) the August 15, 2008 Application for Capital Distribution that was submittedto the Office of Thrift and Supervision (copies of which are attached hereto as Exhibit N.)As explained in Mr. Freilinger's memorandum, the purpose of the planneddecapitalization was to free up low-earning and non-earning assets and make it easer forWMB fsb to stay in compliance with the federal "Qualified Thrift Lender" test, whichprovides that the institution must hold qualified thrift assets (i.e., housing-relatedinvestments) equal to at least 65% of its portfolio assets. By shrinking WMB fsb'scapital base, its mortgage-related assets would increase as a total percentage of its 15 A-15
Page 18
portfolio assets, thereby ensuring compliance with the "Qualified Thrift Lender" test, and the $20 billion could be put to use by Pike Street Holdings, Inc. As stated in Mr. Freilinger's memo, the decapitalization would decrease WMB fsb's leverage ratio from 62% to 25%, which was still more than sufficient since a "well capitalized institution requires an 8% or higher leverage ratio." Since I was told by Regulatory Reporting that the capital distribution notice required 60 days for approval, and the application was filed with the OTS on about August 15, 2008, at the time of the transfer of the $3.674 billion in September of 2008 it was my expectation that the OTS would approve the application by October 15, 2008. Of course, this never happened after the FDIC seized the assets of WMB (including the stock of WMB fsb) on September 25, 2008.
