JPM's Ballet among the Carcasses

"Ballet among the Carcasses" There are many who see the large banks (Goldman Sachs, JP Morgan Chase) and quasi-government agencies (FDIC, OTS, Federal Reserve Bank of New York) as an operating cartel within our country. There has always been a wary eye towards the relationship between these institutions and their secrecy but the events of 2008 shed light on not only the nepotistic course that creates a network of insiders (creating obvious conflicts of interest), the light revealed favoritism and what some would say was outright collusion between the organizations to ensure that selected bankers remained in business. That introductory is quite damning and a statements such as those had better be backed with deductive and logical evidence. To that point I will say this; “It’s best to see who benefited from the hidden and secretive decisions of the Fed, the FDIC and the OTS and back track…” [more]

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I’m of the opinion that JP Morgan was highly ‘ticked’ at WMI’s refusal to accept the $8.00 a share offer in April of 2008. WMI/WaMu instead announced a $7 billion infusion of new capital by new outside investors led by TPG Capital. WMI’s refusal placed WaMu in the cross-hairs of a well connected enemy in JPM and JPM still wanted and even needed those assets. The window to seize WaMu was quickly closing in September of 08, even though WaMu had a “base deposit withdrawl” of 16 Billion, it was announced by Alan Fishman (in June) that WaMu had 50 Billion available with the Discount Window at the Fed and everyone knew that TARP was just around the corner.

Basically, if there was to be a seizure of WaMu that benefitted JPM it had to happen that fourth week of September and it had to happen quickly – and you’ve likely already guessed – that’s exactly what happened.

WMI nor WaMu never received a letter from the OTS to raise additional capital, in fact the OTS, even when placing WaMu into the hands of the FDIC, even stated that WaMu was well capitalized but stated that WaMu was “systemically risky” and that’s why it was placed into receivership. Also, there was a Memorandum of Understanding (MOU) active and in-place between WMI and the OTS.

Worth pointing out again - the OTS said WaMu was “systemically risky” while Mr. Paulson did not add WaMu to the “Do Not Short List” which included 19 instituions Mr. Paulson considered “systemically important” - Which was it? Was WaMu systemically important or not? Within the tiniest of timeframes - the Office of Thrift Supervision, named the FDIC as receiver for the 100 year old institution, and then sold assets of $307 billion and total deposits of $188 billion to JPM within hours for 1.888 Billion. It’s absolutely amazing the timing behind the receivership and it’s even more amazing the ability of JPM to be right there, ready with slides and research - ready to make an offer that conformed to the FDIC’s requirements.

Even more amazing than the receivership’s timing was JPM’s incredible fortune-to be at the ready with bid in hand. JPM managed to navigate the moral hazard involved in participation in a limited auction and low-ball bid for a coveted rival with nary a whisper of populist rage is either a testament to the chaos of the period or the desensitived nature of the common citizen and all of this was done within hours...
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http://seattle.bizjournals.com/seattle/stories/2010/02/01/daily48.html

[[In WaMu’s case, Cantwell said she tried on several occasions to get answers from former Treasury Secretary Hank Paulson and FDIC Chairman Sheila Bair about how the government was handling WaMu in the frantic days before the bank was closed in September 2008. At one point, she said, after Paulson didn’t return her phone calls, she cornered him before a congressional hearing to ask about the bank. After she told him that WaMu had adequate capital and liquidity, he hurriedly answered, “I know all this.”]]

http://seekingalpha.com/user/415296-truth-and-transparency/instablog
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By all accounts, JP Morgan Chase (JPM) purchased the whole bank assets of Washington Mutual for 1.88 billion in September of 2008. Anyone would agree that 1.88B for a 110 year old organization that had 270 billion on deposit, 29 billion in liquid cash, 2700 banks, 8000 ATM’s, and a credit card company is an unjust deal that deserves scrutiny.
The deal becomes even more unjust when one considers the impact it has to JP Morgan - - the deal creates the nation’s second-largest branch network. A combined network reaching 42% of the U.S. population, with strong positions in attractive markets such as California, Florida, New York, Texas, Arizona, Illinois and Washington. With the assumption of WaMu’s assets, JP Morgan will have $900 billion in deposits, 5,400 branches and 14,000 ATMs in 23 states.
In addition when you closely examine the proposed settlement you’ll see that JP Morgan actually receives monies in the form of 70% percent of a tax return, referred to as tax return 1. That percentage equates to 1.82 B or 2.10 B (depending of the actual returned amount). Yes, it’s shocking but that is the deal that Weil, Gotshal & Manges LLP was able to muster in 18 months - - a deal that did not benefit WMI but gives additional monies to JP Morgan Chase. In fact the JPM’s portion of the tax return basically means that JPM purchased WaMu for nothing, that the amount paid to the FDIC under the P&A and the amount to be received in tax returns is a wash, JPM gets WaMu for free.
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