March 22, 2009 in Nation/World

Ex-WaMu holding firm sues FDIC

Associated Press
 

WASHINGTON – Washington Mutual’s former holding company is suing federal regulators for billions of dollars, saying the fire sale of the bank’s assets to JPMorgan Chase violated its rights.

The lawsuit was filed Friday in U.S. District Court in Washington, D.C., 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., argued that Washington Mutual 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.

The holding company is in Chapter 11 bankruptcy proceedings, seeking to regain whatever it can to pay off creditors.

In 2007 and 2008, the lawsuit says, the holding company pumped $6.5 billion in capital into the bank, although one or both of the companies “may have been insolvent.” If that was the case, Washington Mutual Inc. “did not receive any value in exchange for the capital contributions,” and those transactions can be rescinded.

The lawsuit also claims that federal regulators induced the holding company to pour money into the bank when they should have known that WaMu’s seizure was imminent.

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