Washington Mutual holding company sues FDIC
The holding company that owned Washington Mutual is calling shenanigans on the FDIC, arguing that the true worth of Washington Mutual was much more than the amount for which the FDIC sold it to JPMorgan Chase.
SEATTLE - Washington Mutual's holding company is suing federal regulators for billions of dollars, saying the firesale of the bank's assets to JPMorgan Chase violated its rights.
The lawsuit was filed Friday in federal court against the Federal Deposit Insurance Corp., which seized the Seattle-based savings and loan in September. It was the largest bank failure in U.S. history.
Lawyers for the holding company, Washington Mutual Inc., argue that the bank was worth more than the $1.9 billion JPMorgan paid for it in a deal arranged by the FDIC. The lawsuit argues that if WaMu's assets had been liquidated prudently, they would have been worth more than that.
Indeed, if the free market had been allowed to function then JPMorgan Chase and other companies would have had to compete for Washington Mutual at market prices. The very act of buying part (or all) of Washington Mutual would have drive up the share price. The takeover of Wachovia, complete with a bidding war between Citigroup and Wells Fargo, was just such a situation, proving that banks could be taken over without a single taxpayer dollar being used (though the FDIC did meddle in that transaction as well).
Anyone who knows the history of the S&L problems from the 70s and 80s knows that forced sale of Washington Mutual is exactly the same kind of stunt the Resolution Trust Corporation would pull when it was given the power to liquidate financially "troubled" S&Ls. Frequently firms would be told on one day they were sound or were to purchase less solvent entities under the program, only to be taken over the next day for being "unsound".
The free market is far better at allocating resources and recovering them than any political entity ever will be.
SEATTLE - Washington Mutual's holding company is suing federal regulators for billions of dollars, saying the firesale of the bank's assets to JPMorgan Chase violated its rights.
The lawsuit was filed Friday in federal court against the Federal Deposit Insurance Corp., which seized the Seattle-based savings and loan in September. It was the largest bank failure in U.S. history.
Lawyers for the holding company, Washington Mutual Inc., argue that the bank was worth more than the $1.9 billion JPMorgan paid for it in a deal arranged by the FDIC. The lawsuit argues that if WaMu's assets had been liquidated prudently, they would have been worth more than that.
Indeed, if the free market had been allowed to function then JPMorgan Chase and other companies would have had to compete for Washington Mutual at market prices. The very act of buying part (or all) of Washington Mutual would have drive up the share price. The takeover of Wachovia, complete with a bidding war between Citigroup and Wells Fargo, was just such a situation, proving that banks could be taken over without a single taxpayer dollar being used (though the FDIC did meddle in that transaction as well).
Anyone who knows the history of the S&L problems from the 70s and 80s knows that forced sale of Washington Mutual is exactly the same kind of stunt the Resolution Trust Corporation would pull when it was given the power to liquidate financially "troubled" S&Ls. Frequently firms would be told on one day they were sound or were to purchase less solvent entities under the program, only to be taken over the next day for being "unsound".
The free market is far better at allocating resources and recovering them than any political entity ever will be.