WaMu Makes JPMorgan $29 Billion as Shareholders Rail

[HROLLER]

WaMu Makes JPMorgan $29 Billion as Shareholders Rail

By JACOB GAFFNEY
May 26, 2009 9:23 AM CST



Reports this morning are speculating that new accounting rules will allow JPMorgan Chase & Co. (JPM (http://finance.yahoo.com/q/ks?s=JPM): 36.2099 +5.23%) to gain an additional $29bn over the life of certain Washington Mutual loans, as shareholders in the seized bank are joining forces to criticize the handling of the entire affair.
JPMorgan purchased WaMu assets when federal regulators seized the bank back in September.
Now, new rules allow for fair value accounting to determine the worth of underlying collateral, though it is unclear at this point what type of assets are involved in these loans. Previously, JPMorgan would need to declare the value of those assets according to its value in the market. Considering the troubled nature of financials, the latter method is arguably more volatile.
Using the former method, however, JPMorgan is able to mark down $118.2bn of assets by 25% equally and, as of yet, unrecorded $29.1m in pretax income over the life of the loan, according to Bloomberg.
This morning, WaMu shareholders put out a joint statement declaring a rising concern on the way the feds are handling the seized bank.
According to the text, they feel the regulators are setting dangerous precedents that will adversely affect the banking sector in the foreseeable future and these actions not just affect individual shareholders, but the financial sector in general.
“The FDIC’s fire-sale of Washington Mutual assets to JPMorgan changed the game for potential buyers of banks,” says the statement. (http://news.prnewswire.com/DisplayReleaseContent.aspx?ACCT=104&STORY=/www/story/05-26-2009/0005032174&EDATE=) “The new rule seems to be: Get regulators to place the bank into receivership in order to buy the assets at a fire-sale price.”
The shareholders justify their stance by saying the same mishandling is happening in Florida, at BankUnited Financial Corp. (http://www.housingwire.com/2009/05/21/fate-sealed-for-bankunited/) (BKUNA (http://finance.yahoo.com/q/ks?s=BKUNA): 0.4922 0.00%): “Bidders for BankUnited Financial Corp waited on the side lines, hoping for the new form of behind the scenes bailout being offered by the FDIC–assets on the cheap. This has the potential to leave bondholders and shareholders out in the cold, just as was done with Washington Mutual Bank.”
A shareholder at BankUnited told HousingWire that he “criticized the FDIC and the new appointed members of the board of directors,” at a meeting discussing the takeover of the bank.
“Why couldn’t the board look after the interest of the shareholders?” he asks. “They have an obligation and a fiduciary duty to look after the interest of the shareholders and they simply failed to do so.”
“We feel that the FDIC should give a small bone to the shareholders and avoid a future lawsuit, something very similar what happened to the takeover of Wachovia Bank with Wells Fargo Bank,” he adds. “Unfortunately this did not happen and I am afraid that there will be lawsuits forthcoming.”

http://www.housingwire.com/2009/05/26/wamu-makes-jpmorgan-29-billion-as-shareholders-rail/

[HROLLER]

http://www.bloomberg.com/apps/news?pid=newsarchive&sid=aYhaiSOq_Tbc

JPMorgan $29 Billion WaMu Windfall Turned Bad Loans Into Income

By Ari Levy and Elizabeth Hester May 26 (Bloomberg) -- JPMorgan Chase & Co. (http://www.bloomberg.com/apps/quote?ticker=JPM%3AUS) stands to reap a $29 billion windfall thanks to an accounting rule that lets the second-biggest U.S. bank transform bad loans it purchased from Washington Mutual Inc. into income.
Wells Fargo & Co. (http://www.bloomberg.com/apps/quote?ticker=WFC%3AUS), Bank of America Corp. (http://www.bloomberg.com/apps/quote?ticker=BAC%3AUS) and PNC Financial Services Group Inc. (http://www.bloomberg.com/apps/quote?ticker=PNC%3AUS) are also poised to benefit from taking over home lenders Wachovia Corp., Countrywide Financial Corp. and National City Corp., regulatory filings show. The deals provide a combined $56 billion in so-called accretable yield, the difference between the value of the loans on the banks’ balance sheets and the cash flow they’re expected to produce.
Faced with the highest U.S. unemployment (http://www.bloomberg.com/apps/quote?ticker=USURTOT%3AIND) in 25 years and a surging foreclosure rate (http://www.bloomberg.com/apps/quote?ticker=HOMFCLOS%3AIND), the lenders are seizing on a four- year-old rule aimed at standardizing how they book acquired loans that have deteriorated in credit quality. By applying the measure to mortgages and commercial loans that lost value during the worst financial crisis since the Great Depression, the banks will wring revenue from the wreckage, said Robert Willens (http://search.bloomberg.com/search?q=Robert+Willens&site=wnews&client=wnews&proxystylesheet=wnews&output=xml_no_dtd&ie=UTF-8&oe=UTF-8&filter=p&getfields=wnnis&sort=date:D:S:d1), a former Lehman Brothers Holdings Inc. executive who runs a tax and accounting consulting firm in New York.
“It will benefit these guys dramatically,” Willens said. “There’s a great chance they’ll be able to record very substantial gains going forward.”
When JPMorgan (http://www.bloomberg.com/apps/quote?ticker=JPM%3AUS) bought WaMu out of receivership last September for $1.9 billion, the New York-based bank used purchase accounting, which allows it to record impaired loans at fair value, marking down $118.2 billion of assets by 25 percent. Now, as borrowers pay their debts, the bank says it may gain $29.1 billion over the life of the loans in pretax income before taxes and expenses.
Purchase Accounting
The purchase-accounting rule, known as Statement of Position 03-3, provides banks with an incentive to mark down loans they acquire as aggressively as possible, said Gerard Cassidy (http://search.bloomberg.com/search?q=Gerard%0ACassidy&site=wnews&client=wnews&proxystylesheet=wnews&output=xml_no_dtd&ie=UTF-8&oe=UTF-8&filter=p&getfields=wnnis&sort=date:D:S:d1), an analyst at RBC Capital Markets in Portland, Maine.
“One of the beauties of purchase accounting is after you mark down your assets, you accrete them back in,” Cassidy said. “Those transactions should be favorable over the long run.”
JPMorgan (http://www.bloomberg.com/apps/quote?ticker=JPM%3AUS) bought WaMu’s deposits and loans after regulators seized the Seattle-based thrift in the biggest bank failure in U.S. history. JPMorgan took a $29.4 billion writedown on WaMu’s holdings, mostly for option adjustable-rate mortgages and home- equity loans.
“We marked the portfolio based on a number of factors, including housing-price judgment at the time,” said JPMorgan spokesman Thomas Kelly (http://search.bloomberg.com/search?q=Thomas+Kelly&site=wnews&client=wnews&proxystylesheet=wnews&output=xml_no_dtd&ie=UTF-8&oe=UTF-8&filter=p&getfields=wnnis&sort=date:D:S:d1). “The accretion is driven by prevailing interest rates.”
Wachovia ARMS
JPMorgan said first-quarter gains from the WaMu loans resulted in $1.26 billion in interest income and left the bank with an accretable-yield balance that could result in additional income of $29.1 billion.
Wells Fargo (http://www.bloomberg.com/apps/quote?ticker=WFC%3AUS) arranged the $12.7 billion purchase of Wachovia in October, as the Charlotte, North Carolina-based bank was sinking from $122 billion in option ARMs. As of March 31, San Francisco-based Wells Fargo had marked down $93 billion of impaired Wachovia loans by 37 percent. The expected cash flow was $70.3 billion.
The Wachovia loans added $561 million to the bank’s first- quarter interest income (http://www.bloomberg.com/apps/quote?ticker=WFC%3AUS), leaving Wells Fargo with a remaining accretable yield of almost $10 billion.
Government efforts to reduce mortgage rates (http://www.bloomberg.com/apps/quote?ticker=MBAVCHNG%3AIND) and stabilize the housing market (http://www.bloomberg.com/apps/quote?ticker=ETSLMP%3AIND) may make it easier for borrowers to repay loans and for banks to realize the accretable yield on their books. With mortgage rates below 5 percent, originations surged 71 percent in the first quarter from the fourth, a pace that may accelerate during 2009, said Guy Cecala (http://search.bloomberg.com/search?q=Guy+Cecala&site=wnews&client=wnews&proxystylesheet=wnews&output=xml_no_dtd&ie=UTF-8&oe=UTF-8&filter=p&getfields=wnnis&sort=date:D:S:d1), publisher of Inside Mortgage Finance in Bethesda, Maryland.
Recapturing Writedowns
Wells Fargo (http://www.bloomberg.com/apps/quote?ticker=WFC%3AUS), the biggest U.S. mortgage originator, doubled home loans in the first quarter from the previous three months, in part through refinancing Wachovia loans.
“To the extent that the customers’ experience is better or we can modify the loans, and the loans become more current, that could help recapture some of the writedown,” Wells Fargo Chief Financial Officer Howard Atkins (http://search.bloomberg.com/search?q=Howard+Atkins&site=wnews&client=wnews&proxystylesheet=wnews&output=xml_no_dtd&ie=UTF-8&oe=UTF-8&filter=p&getfields=wnnis&sort=date:D:S:d1) said in an April 22 interview.
Banks still face the risk that defaults may exceed expectations and lead to further writedowns on their purchased loans. Foreclosure filings (http://www.bloomberg.com/apps/quote?ticker=FORLTOTL%3AIND) in the U.S. rose to a record for the second straight month in April, climbing 32 percent from a year earlier to more than 342,000, data compiled by Irvine, California-based RealtyTrac Inc. show.
Accretable Yield
The companies bought by Wells Fargo, JPMorgan, PNC (http://www.bloomberg.com/apps/quote?ticker=PNC%3AUS) and Bank of America (http://www.bloomberg.com/apps/quote?ticker=BAC%3AUS) were among the biggest lenders in states with the highest foreclosure rates, including California, Florida and Ohio. Housing prices tumbled the most on record in the first quarter, leaving an increasing number of borrowers owing more in mortgage payments than their homes are worth, according to Zillow.com, an online property data company.
“We’ve still got a lot of downside to work through this year and probably through at least part of next,” said William Schwartz (http://search.bloomberg.com/search?q=William%0ASchwartz&site=wnews&client=wnews&proxystylesheet=wnews&output=xml_no_dtd&ie=UTF-8&oe=UTF-8&filter=p&getfields=wnnis&sort=date:D:S:d1), a credit analyst at DBRS Inc. in New York. “If I were them, I wouldn’t be claiming any victory yet.”
The difference in accretable yield from bank to bank is due to the amount of impaired loans, the credit quality of the acquired assets and the state of the economy when the deals were completed. Rising and falling interest rates also affect accretable yield for portfolios with adjustable-rate loans.
PNC closed its $3.9 billion acquisition of National City on Dec. 31, after the Cleveland-based bank racked up more than $4 billion in losses tied to subprime loans. PNC (http://www.bloomberg.com/apps/quote?ticker=PNC%3AUS), based in Pittsburgh, marked down $19.3 billion of impaired loans by 38 percent, or $7.4 billion, and said it expected to recoup half of the writedown. After gaining $213 million in interest income in the first quarter and making some adjustments, the company has an accretable-yield balance of $2.9 billion.


Jamie Dimon planted "moles" in Wamu??? JPMorgan committed corporate fraud???
http://www.kccllc.net/documents/0812229/0812229090501000000000002.pdf

http://wamustory.com/
http://wamuqd.com/
http://www.wamu-shareholders-resources.com/wamued.html
http://wamuequity.org/history.html

[SonsofLiberty]

Isn't it funny how a few firms are getting so many sweetheart deals?

[opsyscw]

Isn't it funny how a few firms are getting so many sweetheart deals?
Even funnier is how these deals are kept from the public until after they happen. I guess us peons don't get to play. Maybe we need to pay to play. Let me make my pay list:

Murtha
Frank
Pelosi
Reid
Obama

[SonsofLiberty]

Even funnier is how these deals are kept from the public until after they happen. I guess us peons don't get to play. Maybe we need to pay to play. Let me make my pay list:

Murtha
Frank
Pelosi
Reid
Obama

of course, not necessarily in that order.

Now I seem to remember something about transparency on the campaign trail or was he talking about personalities?

[HROLLER]

Even funnier is how these deals are kept from the public until after they happen. I guess us peons don't get to play. Maybe we need to pay to play. Let me make my pay list:

Murtha
Frank
Pelosi
Reid
Obama


It's also amazing that our press is so hush, hush about this...All of the information is out there..I've been sending emails to about 200+ reporters and so far no "main stream" media has run with this but I will have to admit that recently some media have been picking this up, except on t.v. One of these days people will know the truth behind the picture...

[HROLLER]

http://www.nypost.com/seven/04292009/business/wamu_says_dimon_took_illegal_windfall_166693.htm


(http://www.nypost.com/topics/topic.php?t=Jamie_Dimon)
Jamie Dimon (http://www.nypost.com/topics/topic.php?t=Jamie_Dimon) is being accused of wrongfully hoarding an $8 billion windfall gleaned in Washington Mutual's collapse -- and using the cash to prop up profits at his JPMorgan Chase.
In a bitter twist in the mammoth bankruptcy of WaMu, two parent holding companies of the defunct bank said in court papers that JPMorgan Chase refuses to release about $4 billion in cash deposits on the "absurd" belief it "purchased" the cash for $1.88 billion.
JPMorgan is also accused of improperly staking a claim to huge tax refunds worth another $4 billion, papers said. Documents signed by JPMorgan, when it took over WaMu eight months ago in a hasty shotgun marriage arranged by bank regulators, specifically forbid such cherry-picking of key assets, records show.
Sources said hundreds of bondholders are outraged that $8 billion is being stripped out, leaving nothing in the pot for WaMu's holding companies to pay bankruptcy claims.
"Jamie Dimon is essentially keeping money that legally should be going into the pockets of wronged investors," said one source.
JPMorgan said it doesn't comment on litigation.
Court papers said JPMorgan boosted its last quarterly profits by $6.1 billion, or by 65 percent, using the $4 billion in WaMu cash locked up in ordinary deposit accounts.

[HROLLER]

http://www.marketwatch.com/story/shareholders-of-washington-mutual-inc-breath-a-sigh-of-relief?siteid=nbsh

Shareholders of Washington Mutual Inc. Breath a Sigh of Relief

PHOENIX, June 4, 2009 /PRNewswire via COMTEX/ -- For the last eight months, Washington Mutual Shareholders (WAHUQ, WAMPQ, WAMKQ, WAMUQ) have been hunched over their computers, trying to keep up with voluminous information about the Washington Mutual Inc.'s forced bankruptcy, when WAMU bank was seized and sold in what shareholders perceive to be a hostile takeover by JPMorgan Chase of the well capitalized WAMU bank.

The counterclaim filing in Federal Court in Washington D.C. on May 29, 2009 has shown their diligence is paying off. It appears more clearly now than ever they will recoup their phenomenal losses from the lawsuits filed regarding this case. Shareholders have seen the share price increase dramatically since the seizure of WAMU bank in September of 2008, when it dropped nearly to zero, and anticipate further upward movement due to the excellent attorney teams that are representing WMI. They are quite pleased with their attorney representation in this matter.

The 335 page filing in court by Elliott Greenleaf and Quinn Emanual Urquhart Oliver & Hedges, LLP is detailed and comprehensive, bringing up all the points shareholders have been discussing for months. A copy of the court counter claim filing is posted on www.wamustory.com. The prayer for relief which begins on page 132 has 18 specific counterclaims. They are demanding fair market value for the assets that were seized, restitution in an equal amount to JPM's unjust enrichment and multiple other significant monetary damages. Their demand for payment of patent and trademark infringement alone, are treble damages of $6 Billion. They have demanded a jury trial in this matter.

Shareholders have gathered at websites such as www.wamucoup.com (950 members) www.wamuequity.org (796 members) as well as yahoo and google financial sites, to share their "due diligence" with each other over the last eight months. Shareholders should register their shares at www.wamuequity.org to give more strength to their fight for an Equity Committee in this case. Shareholders feel an Equity Committee is their best protection.

Weil, Gotshal and Manges, under the leadership of Marcia Goldstein, have put together an excellent team of attorneys that read like a "who's who" list of the best and brightest firms in the country. Shareholders will continue to watch everything in this dramatic and complex case.

SOURCE www.wamuequity.org

http://www.wamuequity.org

[kaydahl]

Wow. This is an awesome story about the power of the people.

How many have owned WaMu as part of their 401k without even realizing it? And had it liquidated so that they will never see the gains these shareholders are fighing for? IMO lots of funny business gets hidden in the realm of mutual funds, and people tend to have no idea what their 401k portfoilio contains. Unfortunately many 401k plans have only mutual funds to choose from and their activity cannot be tracked until well after it has occurred....and even to get that information requires digging.

What is going to happen to GM shares?

http://www.marketwatch.com/story/shareholders-of-washington-mutual-inc-breath-a-sigh-of-relief?siteid=nbsh

Shareholders of Washington Mutual Inc. Breath a Sigh of Relief

PHOENIX, June 4, 2009 /PRNewswire via COMTEX/ -- For the last eight months, Washington Mutual Shareholders (WAHUQ, WAMPQ, WAMKQ, WAMUQ) have been hunched over their computers, trying to keep up with voluminous information about the Washington Mutual Inc.'s forced bankruptcy, when WAMU bank was seized and sold in what shareholders perceive to be a hostile takeover by JPMorgan Chase of the well capitalized WAMU bank.

The counterclaim filing in Federal Court in Washington D.C. on May 29, 2009 has shown their diligence is paying off. It appears more clearly now than ever they will recoup their phenomenal losses from the lawsuits filed regarding this case. Shareholders have seen the share price increase dramatically since the seizure of WAMU bank in September of 2008, when it dropped nearly to zero, and anticipate further upward movement due to the excellent attorney teams that are representing WMI. They are quite pleased with their attorney representation in this matter.

The 335 page filing in court by Elliott Greenleaf and Quinn Emanual Urquhart Oliver & Hedges, LLP is detailed and comprehensive, bringing up all the points shareholders have been discussing for months. A copy of the court counter claim filing is posted on www.wamustory.com. The prayer for relief which begins on page 132 has 18 specific counterclaims. They are demanding fair market value for the assets that were seized, restitution in an equal amount to JPM's unjust enrichment and multiple other significant monetary damages. Their demand for payment of patent and trademark infringement alone, are treble damages of $6 Billion. They have demanded a jury trial in this matter.

Shareholders have gathered at websites such as www.wamucoup.com (950 members) www.wamuequity.org (796 members) as well as yahoo and google financial sites, to share their "due diligence" with each other over the last eight months. Shareholders should register their shares at www.wamuequity.org to give more strength to their fight for an Equity Committee in this case. Shareholders feel an Equity Committee is their best protection.

Weil, Gotshal and Manges, under the leadership of Marcia Goldstein, have put together an excellent team of attorneys that read like a "who's who" list of the best and brightest firms in the country. Shareholders will continue to watch everything in this dramatic and complex case.

SOURCE www.wamuequity.org

http://www.wamuequity.org

[Henry Alden]

This should perk the interest of Bank of America stockholders ...

http://www.reuters.com/article/innovationNews/idUSTRE55N4KL20090624