WaMu examiner deals blow to shareholders
A court-appointed examiner found Washington Mutual Inc.'s settlement with JPMorgan Chase and federal regulators is reasonable because it will end their court battles over the largest failure of a U.S. bank.
Washington Mutual Inc.'s settlement with JPMorgan Chase and federal regulators is reasonable because it will end their court battles over the largest failure of a U.S. bank, a court-appointed examiner found.
Lawyer Joshua Hochberg said fighting JPMorgan and the Federal Deposit Insurance Corp. in court would put at risk billions of dollars in tax refunds and other assets that could be used to pay creditors.
Continuing to fight, as shareholders have urged, would be "gambling with currently guaranteed recoveries," Hochberg wrote in a report made public Monday in U.S. Bankruptcy Court in Wilmington, Del. "The ultimate resolution of many of the claims could take years."
Seattle-based Washington Mutual Inc. has designed a reorganization plan around the settlement, which would bring $7 billion to creditors. Shareholders would be paid nothing.
The shareholders oppose the settlement, arguing that lawsuits could bring enough money to pay off all of WMI's debts and still leave something for them.
U.S. Bankruptcy Judge Mary F. Walrath appointed Hochberg and asked him to analyze the proposed settlement. Under WMI's reorganization plan, all the company's remaining assets would be liquidated and only a reinsurance company would exit bankruptcy.
WMI filed for bankruptcy Sept. 26, 2008, the day after its banking unit was taken over by regulators and sold to JPMorgan for $1.9 billion. Before it failed, Washington Mutual Bank had more than 2,200 branches and $188 billion in deposits.