WAMU plan has nothing for most

Under the reorganization proposal filed late Friday by the bankrupt shell of Washington Mutual, shareholders get nothing – no money, and not even a chance to vote on the plan.

Instead, the holders of 1.7 billion shares of Washington Mutual Inc. (WMI) would be formally wiped out.

Certain classes of creditors would vote on approving the plan, but it’s assumed owners of WaMu common stock would reject the proposal, so their votes won’t be tallied.

The company will distribute more than $7 billion in assets as it liquidates, but it expects that money to be exhausted long before reaching common shareholders. Under federal bankruptcy law common shareholders are the last to be paid when a company reorganizes or liquidates.

The plan is certain to spark fresh outrage among WaMu shareholders who’d hoped to get something out of the bankruptcy.

Many have banded together online to press their claims that JPMorgan paid too little for WaMu’s banking operations after they were seized by regulators in September 2008.

The proposed plan hinges on a “global settlement” of a tangle of litigation among WMI, the Federal Deposit Insurance Corp., JPMorgan Chase and certain creditor groups.

When regulators seized Washington Mutual Bank from its parent, the FDIC immediately sold the bank’s operations to JPMorgan for $1.9 billion.

WMI requested the U.S. Bankruptcy Court in Delaware schedule a May 19 hearing on the plan. The plan says WMI’s liquidiation could be completed by July.