JPMorgan Chase (JPM) is suing the Federal Deposit Insurance Corp. for over $1 billion dollars related to the bank’s purchase of Washington Mutual (WMIH). The financial firm said that the FDIC did not honor its duties per the purchase agreement.
When Washington Mutual suffered the biggest bank failure in our nation’s history during the financial crisis in 2008, FDIC became its receiver and brokered the sale of assets. JPMorgan, which made the purchase for $1.9 billion, says that the FDIC promised to protect or indemnify the bank from liabilities. Regulators had encouraged the firm to buy Washington Mutual hoping this would help bring back stability to the banking system.
Since then, however, contends JPMorgan, the FDIC has refused to acknowledge mortgage-backed securities claims by investors and the government against the firm. The bank says that the cases should have been made against the receivership instead. (In its lawsuit, JPMorgan says there are enough assets in the receivership to cover a settlement with mortgage companies Freddie Mac (FMCC) and Fannie Mae (FNMA) and other claims, such as a slip and fall personal injury case involving a Washington Mutual branch.) Meantime, the FDIC maintains that JPMorgan is the one who should be accountable for any liabilities from its acquisition of Washington Mutual.
Since 2008, JPMorgan has agreed to multiple MBS settlements. Investors lost millions from bundled mortgages as the housing market crumbled and they wanted their money back. Recent settlements include last month’s $13 billion deal with the Justice Department and state regulators over mortgage-linked bonds, and another $4.5 million agreement with 21 institutional investors.
JPMorgan also says that it wants the FDIC receivership to separately take care of possible damages from the litigation brought by Deutsche Bank National Trust Company. The latter wants up to $10 billion on behalf of over 100 trusts that have Washington Mutual-issued bonds that have performed poorly.
If you suspect you sustained losses caused by institutional investor securities fraud, contact The SSEK Partners Group today.
JPMorgan Chase Sues FDIC for More Than $1B, JPMorgan/AP, December 18, 2013
JPMorgan sues FDIC over Washington Mutual, CNNMoney, December 18, 2013
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