Business

Friday March 27, 2009

JPMorgan Chase sues Washington Mutual


NEW YORK: JPMorgan Chase & Co has sued the bankrupt holding company for Washington Mutual Inc in an effort to preserve its purchase of the banking operations of what was once the largest US savings and loan.

The lawsuit was filed on Tuesday with the US bankruptcy court in Delaware, three days after Washington Mutual sued the Federal Deposit Insurance Corp (FDIC) for well over US$13bil in connection with the purchase.

With US$307bil of assets, Washington Mutual is by far the largest US lender to fail.

David Berz, a lawyer for Washington Mutual, did not immediately return a call seeking comment.

The lawsuits will not undo JPMorgan’s US$1.9bil purchase on Sept 25 of Washington Mutual’s bank operations, a transaction arranged by the FDIC.

But resolution of the suits could be a template for other US bank failures, which analysts believe could reach into the hundreds over the next couple of years.

JPMorgan said it sued to ensure that it does not lose any of its interests in the Washington Mutual operations, which it said it bought in good faith.

The New York-based bank also wants to be reimbursed for various claims it might face.

”Protection of the title conveyed by the FDIC to institutions like JPMorgan Chase, who are encouraged to step into the breach and provide the stability and continuity necessary to avert a run on a failing bank and disruption of its services to the public, is critical to the ability of the regulators to manage bank failures,” JPMorgan said in its complaint.

The bank also said Washington Mutual’s failure came at no cost to the FDIC insurance fund, while the July 2008 failure of IndyMac Bancorp Inc, a California thrift one-tenth the size of Washington Mutual, cost the FDIC US$10.7bil.

The holding company believes JPMorgan paid too little for its bank operations and is litigating to recover more money for creditors in its Chapter 11 case.

Washington Mutual’s claims concern capital contributions made to the banking unit, trust preferred securities, tax refunds and other matters. – Reuters


Latest business news from AP-Wire

  • E-mail this story
  • Print this story