By John E. Fiorentino

I don’t usually write articles like these as I try and stick to
Science in my capacity as owner of the Newsvine/MSNBC Science and
Space Gateway.

The events in the financial markets in the past few weeks have however
motivated me to stray from my prime area of interest.

Specifically, I was appalled at the seizure of Washington Mutual
(WaMu) by the FDIC acting at the behest of the Office of Thrift
Supervision (OTS).

I want to say upfront, that I had stock in WaMu, so I do have an axe
to grind as I incurred losses after the seizure as the bank’s common
stock plunged to 16c after the news. Washington Mutual has since filed
for bankruptcy protection.

My interest goes much farther however than the loss of invested funds.
My concern revolves around the events leading up to the seizure.
Events which were orchestrated in the media, in the trading of the
stock on the NYSE, statements by analysts covering the stock,
statements by the bank’s management, the oblivious regulatory response
by the SEC, demeaning and derogatory comments by the likes of CNBC’s
Jim Cramer and the “head in the sand” approach by the touted David
Faber, also of CNBC.

I want to try and stay on track with this piece and not wax
philosophical, or at least hold those musings to a minimum. Also, I
wish to hold the length of this article to a reasonable degree while
still conveying the salient points as I see them. I will also be
asking all concerned citizens, (not just shareholders) to become
proactive in voicing their concerns on this matter.

The prime concern

The overriding issue in this rather sorry tale boils down to some very
simple questions.

1. Was OTS justified in requesting FDIC seize WaMu?

2. Did FDIC act properly in its seizure of WaMu?

3. Who (if anyone) had advance notice of the FDIC auction of WaMu and
exactly when were they notified?

4. Why was this “auction” conducted on a Thursday night, when the
“normal” procedure in closures almost universally occurs on a Friday
to enable FDIC time to review the books of the seized entity over a
weekend?

5. Why was this seizure initiated immediately AFTER media reports of a
possible “bailout” deal by the Congress?

6. Who at FDIC determined that the sum of 1.9 billion dollars paid by
JP Morgan-Chase was an adequate figure to acquire the assets of WaMu,
whose deposit base alone at the time stood at approximate 129 billion
dollars?

7. What motivated OTS to determine that the withdrawal of deposited
funds (mainly by those with more than $100,000 in their accounts)
constituted a true “run on the banks deposits” and not possibly an
orchestrated event?

8. What decision making process was employed in considering the
possible cascade effect of the premature seizure upon other pending
bank acquisitions?

A myriad of other questions

There are of course a myriad of other questions which hang over this
deal by FDIC. For the sake of brevity I will omit them at this writing
as the above eight should spur the needed concern.

The media role

Without running the risk of straying too far into the ozone as it
relates to the media’s handling of this situation, let me just comment
on two of the more prominent purveyors of influence in financial
television. Those two individuals, namely Jim Cramer and David Faber
at CNBC seemed to act in less than a professional fashion.

Personally, I consider myself a fan of Jim Cramer (or at least I did).
Cramer, who certainly takes some getting used to most certainly over
stepped the bounds of propriety when he labeled (at least by
inference) WaMu investors as “clowns.”

Cramer’s tale revolved around some sap investor who supposedly
collared him on the street and began to give his reason why WaMu may
be a good investment -- spurred apparently by the then impending
government bailout.

Cramer’s take, was to label this individual a “clown” even as he
couched his remarks with some indication that he may have been just as
much a “clown” at some point in the past.

While all of this was rather amusing (to some) I doubt those elderly
individuals, or those who held WaMu in their pension and 401k funds,
or individuals acting on the advice of Standard and Poors for
instance, which maintained a “hold” on the stock, or very large
investors like TPG Capital Group who only recently infused billions
into WaMu were quite as amused as Mr. Cramer. Cramer of course
seemingly gloated in the fact that his chicken-little prediction of
impending bank failures had “vindicated” his true genius as a
financial prognosticator.

David Faber, the touted investigative financial journalist at CNBC
kept his head firmly entrenched in the sand as he blew off my
telephone call to him after I voiced concerns regarding the details of
this rather hastily concocted seizure.

As of this writing, a group of shareholders and other interested
parties are looking into the possibility of legal action. I would hope
that all interested citizens, shareholders and non shareholders, would
join together in questioning this government action.

Those interested should call, e-mail or write their elected
representatives and request a thorough investigation into

We need more voices like this one. Need to write to the major
newspapers.

Nice post John..plz keep up.

Sprinter! Damn!!!! I have been reading your posts since the nazi's
took over WM. They always said that his body was never found! Hitler
is alive today and manipulating our financial market.... I knew he was
a smart man but damn that guy is up in years! But then that is the way
of the world today, Obama Bin Laden is running for president! Go
figure!!!! Americans like free press!!! Get us on with Katie to
express our views. Not that fluff crap that is being pushed on us by
the media.; Katie you suck, might as well have kept that other asshole
doing the CBS News!

I'm interested in an investigation great post.  This should not have
happened like this as there were many better options.  I think the
FDIC was worried they didnt have enough funds to insure wamu so they
made back room sweet heart deal with JP boys.  Reminds me of some of
the Gov blunders they had in Texas !  This whole thing stinks to high
heaven and i want answers !  Esp after being told that WM is "well
capitalized" .  1.9B thats a joke.  And why is everyone trying to
vilianize the shareholders?  Is there something wrong with investing?
Surely they could have waited for the bill in congress to go thru
before they moved.

I somehow felt that WM was a political move

Once WM was taken apart, everyone stopped threaten each other in the
discussion of the 700bil bailout and within three days, we have an
agreement.
I felt that it was an act to pressure everyone to get on the same boat
and agree

Anyway it is a done deal and I lost my money like many on you here

Great post John.... I guess, even if there is one reasonable answer to
your 8 questions,
WaMu shareholders would not have been in this situation. Hope this
clear Scandal by the
FDIC will be unearthed soon...!

Please provide the link where did you got this ariticle from.  Do I
permission to upload this article on a different forum.

Where can I sign a petition to bring some sort of civil action against
the FDIC/JP Morgan?

In the very least we should be receiving some sort of conversion to JP
Morgan stock, even if it is at a reduced rate.

Did WM really go back up $1.53 after hours?

Well do those that still have WaMu shares get from JPM.  Are they
going to get some shares of JPM or what is it.  Would it be like BAC
on countrywide or what would happen.  Would Wamu continue to trade as
the LEH, FRE, FNM are still trading.  If it will still trade there
would be hope that some people may recover some of their funds.  Lets
keep our fingers crossed.  The Bush Administration has done the worse
for America.  Since this man came into office it has been one bad
thing after the other.  I do not know if I could say we are getting
the wrought of God or what is happening with this great country.

I know that damn bush and his weather machine causing hurricane
katrina.......good thing obama is going to turn it all around

I feel sorry for shareholders who had WM (from last year and beyond)
in their 401K, pension plans, IRAs and mutual funds. For those who
speculated (bought in the last 3 months), I hope you only bought what
you could afford to lose in a slot machine. I stayed on the sidelines
for this one. The FDIC is responsible for protecting depositors, not
shareholders, and it had to be done. I don't care what the CEO said
(Alan Schwartz said BSC had no liquidity problem 96 hrs before they
went under). I don't think blaming Bush is in any way reasonable
(although still apparently popular).

Look Katie is a damn good reporter.  She brought the good side of the
goofy Alakan that does not know her left from her right.  She can see
Rusia from her bed room.

LINK:

http://research-investigations.newsvine.com/_news/2008/09/28/1925212-...