Tuesday, April 28, 2009

Washington Mutual Sues JPMorgan To Recover $4 Billion In Deposits

WaMu has had enough and has filed a suit against JPM, trying to recover its $4 billion in deposits. WaMu, claims the money is being held by its former subsidiary, Washington Mutual Bank, which JPMorgan bought for $1.9 billion last year (not a bad deal if we may say so ourselves: you buy $1 for less than 50 cents on the dollar, with the FDIC guaranteeing any potential losses on the transaction). Seattle-based Washington Mutual has been trying to recover the money since filing for bankruptcy in September.

“JPMC has no basis to withhold the debtors’ funds and the funds are accruing interest at a rate significantly less than what the Debtors’ estates would otherwise be earning,” Washington Mutual said in the court filing attached below.

JPMorgan has declined to return the money, saying it may have a claim on the funds itself and that it cannot give Washington Mutual the money without receiving a so-called set-off right from the bankruptcy court, according to court papers filed by WaMu. The set-off would ensure JPMorgan is paid for any claims it has against WaMu.

Not only that, but the stealthy Sheila Bair has said it also may have a claim on the cash, at the expense of WaMu bondholders, who state that the withdrawal would be unfair without forcing WaMy to prove it owns the cash.

Bondholders have our sincerest sympathies and condolences.

(Check out page 24, not a bad balance to see in your bank statement).

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