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business newsWaMu Sues FDIC for Sabotage, $13.5 Billion
By
Scott Reeves Mar 23, 2009 12:15 pm
Brief scrutiny of today's headlines.
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The former parent company of Washington Mutual has sued the Federal Deposit Insurance Corporation (FDIC) for about $13.5 billion stemming from the loss of its banking operations.
JPMorgan Chase bought Seattle-based Washington Mutual’s banking business for about $1.9 billion after the thrift failed. The New York bank didn’t acquire the parent holding company - which filed for Chapter 11 bankruptcy protection the day after the FDIC approved the sale of Washington Mutual’s banking operations to JPMorgan Chase.
Washington Mutual failed last year after steep mortgage losses. In 10 days, depositors withdrew about $16.7 billion. It’s the largest US lender to fail.
In a lawsuit filed at the US District Court for the District of Columbia, the thrift’s former parent says the FDIC never clearly stated a reason for denying its claims, prompting the legal action.
Washington Mutual’s former parent company seeks to recover about $6.5 billion in capital contributions, $4 billion in preferred securities and as much as $3 billion in tax refunds. The lawsuit also seeks damages totaling $177.1 million for unpaid loans made to the banking unit.
In January, the FDIC rejected claims filed by the former parent company of Washington Mutual because it failed to state adequate grounds for recovery. Filing a claim is the first step in the legal wrangling and is usually followed by a lawsuit because the claim is routinely rejected.
The parent company seeks to pay off creditors with money it recovers after filing for Chapter 11 protection.
Merits of the case aside, one thing is clear: This is part of the Lawyer’s Full Employment Act.
No positions in stocks mentioned.
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