The examiner's job was to determine if Wamu was solvent at the time of seizure since the bank was an asset of the holding company WMI. Wamu was indeed "Solvent" as far as assets/liabilities and tier 1 rating go so this right here is a wrong statement. The problem Wamu had was liquidity and this was stated in the examiner's report. Had Wamu been given the same loans JPM, C, BOA, WF were given from the FED, they wouldn't have had liquidity crisis either.
That is one of the reasons bank holding companies are set up so as to insulate the parent corp from the bank. They could technically still be able to survive by filing BK under chapter 11. They may be able to operate, yes... If their assets are not taken unwillingly. You look at any corporation out there and if their holding company assets are taken, they bk right? The trust preferred securities Wamu is responsible for? The assets to those are sitting with JPM right now. How is it possible for JPM to receive assets without accepting the direct liabilities from those assets?
The unfortunate thing is that the remaining assets get dispersed in a totem pole fashion with common shareholders getting wiped out since they are at the bottom. This is entirely understandable, although unfair, understandable. At the same time, when assets are taken which should not have been this makes a big difference on what the company still holds at the end for shareholders
I have had this happen to me personally when I worked for a savings bank back in the late 1980s early 1990s during the S&L failures. I was sitting on a boatload of options and even though I knew the lenders had given the bank away I couldn't exercise and SHORT the company as an insider. I got over it and changed careers when the FDIC seized the bank. Now, at the same time with the FDIC giving JPM and everyone else INFORMATION that Wamu was failing, do you believe it would be "ok" for them to short Wamu? Do you really think JPM, C, GS didn't short this? LOL, got the money got the power to be above the law huh?
Banks are failing on a daily basis.
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It's all a result of stupidity by lenders and Congress. The latter not realizing what they unleashed when they repealed Glass Steagall. I do agree with you here, at least on something...
BTW as far as you other post on the run on the bank, when a bank needs deposits they boost their interest rate on Jumbo CDS which extend beyond the FDIC limits of insurance. It is known as hot money. The caveat to the item below is they'll yank the deposit in a heartbeat if there is any clue the bank will fail.
Funds that are controlled by investors who seek high short-term yields when the funds are likely to be reinvested somewhere else at any time. Some financial institutions attract hot money by offering above-average yields on certificates of deposit. However, if the rate is lowered, the funds are likely to be lost to another institution or investment. This is the answer that was never made, was it this type of money or was it money JPM & their cronies deposited, waited until it was loaned, then pulled theirs creating the "run"
Finally with regard to the short selling of WMI. It is not the SEC's job to protect an investor who has an interest in a failing company. If other banking institutions (some much smaller than Wamu) were considered systematically important to not be able to be shorted, why was Wamu not put on the no short list when asked by killinger
They were shorting WMI it had nothing to do with the bank. They were shorting the holding company. As I previously posted above I would have done the same thing with regard to the holding company I worked for. Well, at the same time with the "competition" shorting the stock... Doesn't this go against them also being able to buy the scraps? You are right, they shorted the holding company which in turn gave a dishonest outlook of the holding companies finances, thereby assisting in the so called bank runs
The issue of shorting only dealt with the forebearance agreements regarding bond holders. The stock price drops the interest rate goes up on the bonds. It had nothing to do with the bank failure. The FDIC would have been ill-advised to suggest to the SEC that WMI get added to the no short list. The FDIC didn't advise for any of the banks to be on the no short list, that was the Treasury & FED behind it. As far as shorting only affecting forebearance agreements, it also affects confidence in not only the holding company, but also the the bank. I'm sure this confidence buster of seeing Wamu dropping from tens of dollars per share to the over 40% short pps of $2. This DOES affect confidence in someone that just watched IndyMac fail and lehmans fail soon after!
It doesn't matter, you have your opinion of "Well, the FDIC followed the law as Wamu may have ended up failing"... Yes, but at the same time the FDIC was undermining Wamu finding it's own buyer themselves, why? John Reich even told the FDIC that it was NOT their job to merge banks. Why? It would have been NO COST to the FDIC if Wamu would have found their own buyer, so why do it? Why didn't the examiner find this out? C'mon now, the FDIC should not have been out telling people interested in the bank that wamu is getting ready to be siezed. This in itself tells me there was the pre-meditated plan to kill Wamu and feed the scraps to JPM. Why the secret meetings with BAIR/PAULSON? Why the meeting soon after BAIR/Paulson had with Bonderman? To let Bonderman know he'd be taken care of with another bank failure, this one he could control (Corus)? This is a pathetic way to steal from a lot of people and I hope those responsible will burn in hell. Don't worry, I won't be visiting your board anymore as this is my last post here. I've lost all my faith not only in the legal/judicial system here, but the POS Country as a whole since greedy power hungry idiots are running it all! Where are the checks and balances of the FDIC/FED? It's went from a Country of freedom & justic to a Country ran strictly by those with the money
