On Monday, failed bank Washington Mutual Inc. filed a motion in federal court to seek permission for questioning third parties, including some regulators and banks connected with the Washington Mutual seizure.
These third parties include regulators such as the Federal Deposit Insurance Corp., the U.S. Treasury Department, the Federal Reserve, the Securities and Exchange Commission and former Treasury Secretary Henry Paulson. Others who have been subpoenaed include Moody’s Investors Service (MCO), Banco Santander (STD), Toronto-Dominion Bank (TD), Wells Fargo (WFC) and Goldman Sachs (GS), which advised Washington Mutual on its sale. The company wants to investigate discussions between JPMorgan & Chase Co. (JPM) and these parties, who were involved in its seizure.
Washington Mutual is probing JPMorgan over suspicions that it had engineered its failure to acquire its assets at fire-sale prices. Owners of Washington Mutual alleged that JPMorgan spread rumors, leaked confidential information and manipulated the market to make Washington Mutual look more troubled than it actually was, which stripped Washington Mutual of $16.7 billion worth of deposits over a 10-day period. Prior to this failure, JPMorgan had unsuccessfully attempted to buy the hefty savings and loan.
Washington Mutual seeks the disclosures as a way to maximize its return to creditors of the holding company. Apart from this, Washington Mutual is also fighting a legal battle with JP Morgan & Chase for $4 billion of deposits and several billions in other assets. The attorneys for both the companies have laid claims to the disputed assets following JPMorgan’s acquisition of the failed bank last year.
Washington Mutual, one of the largest U.S. savings and loans organizations, was heavily exposed to bad mortgage investments at the heart of the financial crisis. The company was closed by regulators who orchestrated a last-minute sale of its assets to JPMorgan Chase for $1.5 billion on Sept. 25, 2008.
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