Will the FDIC Have to Answer for JP Morgan's WaMu Sins?


Sheila Bair is already going to have trouble trying to figure out how to unload crap failed bank assets now that Obama decided to grow a pair and recruit Paul Volcker's scary ass to crack down on TBTF once and for all. And now she might have to answer for Washington Mutual. No shit, I wonder why? The bloody footprints led straight out of the murder scene and right to the FDIC's front door, what's hard about that? Oh sorry, innocent until proven guilty.

Troy Racki via Seeking Alpha:

There is reason to believe that the Subcommittee on Oversight and Investigations of the House Financial Services Committee is also reviewing the FDIC’s actions because of its refusal to comply with multiple Freedom of Information Act requests regarding Washington Mutual, one of which was filed by the Puget Sound Business Journal. “I have requested [the committee’s] prompt review of this matter,” states Congressman Wally Herger (R-Calif.) through an e-mail with his office.

While shareholders who were “zeroed” by the sudden seizure of their bank are hopeful of what these investigations may reveal, which may include reparations, Jim Cramer’s TheStreet.com states that, “Washington politicians and regulators will be hesitant to reward vulture investors who have bought WaMu securities on the cheap following its 2008 bankruptcy.” Oddly enough this statement comes after the same article recommends investors purchase the distressed senior bonds of Washington Mutual Bank.

Better yet, someone crunched the math on what JPM's made off the deal:

jpms valuation of wamu:

JPM made an offer in march 08 for wmi

+ 6.800 mm for the commons (850 mm shares x $8)

included in the deal was also the assumption of some debt
+ 3.400 mm for the preferreds
+ 22.000 mm for the bank bonds
+ 6.800 mm for the holding bonds
+ 1.400 mm other debt of wmi

+ 40.400 mm would have been the total cost for jpm

in september 08 jpm bought jpm from fdic only wmb for 1.888 mm, without the most liabillities, and wmb had additional
+ 7.200 mm injection from tpg
+ 4.000 mm cayman trust assets

+ 51.600 mm total

take off the
- 7.800 mm losse for wmi for the Q2 and Q3/08
- 1.888 mm price paid to fdic from jpm

makes a total profit for jpm

+ 41.912 mm or 42 billion

this is pure capital, and therefore jpm made unjustified profit with it until now:

41.912 x 20 x 0,0375% / 12 = 2.619 per month,
until now x 15

+ 39.285 mm unjustified profit

+ 81.197 mm or $81,2 billion

so jpm made an illegal and unjustified enrichment of $81 billion until now! And add $2.619 mm every month!

Let's not forget that $4 billion in WaMu deposits JP Morgan is still holding onto for, what, sentimental reasons?

Get to answering, Sheila, chop chop.

Jr Deputy Accountant

Some say he’s half man half fish, others say he’s more of a seventy/thirty split. Either way he’s a fishy bastard.

0 comments: