116523.  koi    View profile
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From: koi <takamiyada...@gmail.com>
Date: Fri, 3 Jul 2009 19:24:10 -0700 (PDT)
Local: Fri, Jul 3 2009 7:24 pm
Subject: WaMu win Justice will send BAC to $30 - 40 / Must Read ( Very
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WaMu
http://www.patenthawk.com/blog/2009/04/wamu.html
Washington Mutual (WaMu) is a poster child of the mortgage-lending
irrational exuberance that led to the current economic depression. A
run on the bank last September led to its wrenching government-
mandated rescue by JP Morgan Chase. WaMu was the biggest bank failure
in U.S. history, and was sold in a hastily arranged wamu-bam-thank-
you-
man auction. WaMu is now suing the FDIC, for selling it off for only
$1.9 billion, claiming it had no such right. Meanwhile, JP Morgan has
filed its own suit, seeking title to disputed WaMu assets, including
its tiny portfolio of eight patents granted and pending, as well as
over 300 domestic and international trademarks, and 1,300 Web domain
names. The Delaware district court judge handling WaMu's bankruptcy
case has given WaMu permission to hire a consulting firm to valuate
the bank's IP assets.

Posted by Patent Hawk at April 16, 2009 10:11 PM | Patents In
Business

Comments
http://wamustory.com/

http://wamuqd.com/

Posted by: HROLLER at April 20, 2009 2:11 PM

On Thursday September 25th 2008, Washington Mutual Inc aka WaMu Inc.
or WMI or WaMu, common shares trading under the symbol WM, opened at
$2.62, rose to $2.69 within the first hour, and then fell on average
for the rest of the day and closed at $1.69. In after hours trading
it
quickly dived without stopping to as low as $0.09 and then closed a
couple hours later at $0.16. Take note it fell 90.5% just in after
hours. During the regular day it fell 35.5%. For the entire day it
fell 93.89%. All these percentages are based on the open, and
excluding the pre-market trading data, which I do not have. For the
day, the DJIA rose 196.89 points, and closed at 11,022.06

Clearly anyone who held WaMu through the day experienced a financial
wipeout in their position. What caused this wipeout? In a statement
issued on the night of September 25th the Office of Thrift
Supervision
(OTS), an office of the US Treasury, said “An outflow of deposits
began on September 15, 2008, totaling $16.7 billion. With
insufficient
liquidity to meet its obligations, WaMu was in an unsafe and unsound
condition to transact business. The OTS closed the institution and
appointed the Federal Deposit Insurance Corporation (FDIC) as
receiver. The FDIC held the bidding process that resulted in the
acquisition by JPMorgan Chase.” (link). WaMu had been sold and
seized.
The process of selling and seizing WaMu had actually begun prior to
September 15th, reportedly having been started during the first week
of September, 2008.

Washington Mutual Inc is a bank holding company that owned two banks,
the Washington Mutual Bank, Henderson, NV and a subsidiary of that
bank, Washington Mutual Bank, FSB, Park City, UT. The first mentioned
bank was the main banking operation, and the focus of everyone's
attention. Both banks received the same treatment simultaneously on
September 25th, 2008. For brevity they are usually referred to
singularly as the Washington Mutual Bank aka WaMu Bank or WMB or
WaMu.
For the rest of this text this convention will be followed and they
will be referred to as one enterprise and principally referring to
the
vastly larger Henderson NV incorporated bank.

Seventeen days earlier on Monday September 8th, the Board of
Washington Mutual removed CEO Kerry Killinger due to losses from
subprime mortgages and credit card loans and replaced him with Alan
Fishman. WaMu simultaneously announced (link) that they had
negotiated
a Memorandum of Understanding with the OTS concerning aspects of the
bank’s operations. It concluded with this sentence. "The business
plan
will not require the company to raise capital, increase liquidity or
make changes to the products and services it provides to customers."
WaMu's new CEO Alan Fishman was experienced in bank mergers. In 2004
as CEO of Independence Community Bank Corp he completed a merger with
Staten Island Bancorp, Inc and then in 2006 he worked out the well
executed sale of Independence Community Bank Corp to Sovereign
Bancorp. His employment and hefty salary with WaMu were seen as an
indication WaMu was setting itself up for a merger.

For the ten days prior to the seizure WaMu experienced an
acceleration
of withdrawals, and corresponding draw downs in its liquidity, that
the regulators at the OTS and FDIC say justified a seizure of the
bank. The accounts that withdrew were mostly large retail accounts of
over $100,000, which at the time was the FDIC insurance maximum.
These
accounts were used primarily for payroll purposes. These accounts
were
mostly in California, where the memory of the IndyMac bank seizure
was
likely on their minds. The speed and amounts withdrawn do not qualify
as a bank run, as a bank run is a complete wipeout of deposits over a
few days. At most it could be characterized as a walk on the bank.
The
withdrawals were done by electronic banking over the internet and by
wired funds. It was not in the news, people were not lined up outside
the bank. WaMu was the largest thrift or savings & Loan in the
nation,
and the sixth largest bank by deposits. They had 2,239 branches in 15
states, concentrated in the west and south. They were large enough
that the Federal Reserve assigned them onsite full time bank
inspectors to monitor, among other things, liquidity levels. The
Federal Reserve was witness from beginning to end of the liquidity
draw down.

A walk on a bank, is a mild form of a run on a bank. Bank runs were
typical of the great depression which started in 1929. Customers
wanted their cash in their hand, because if a bank died and locked
its
doors, their cash would be forever beyond their reach. Bank runs have
an effect on the public and the government that tends to snowball and
be a self fulfilling prophecy. If a new bank has a problem, because a
bank run has happened recently, it may be happening again now, so
they
do a run on that bank etc. Bank runs close banks down, and draw their
cash down to zero. A slew of bank runs that closes banks down is
known
as a bank panic.

In response to the bank panics of 1929 and the early 1930's, in 1933
the government created the Federal Deposit Insurance Corporation
(FDIC). The FDIC is a government corporation that provides insurance
on bank deposits. The primary reason for creating the FDIC was to
prevent bank runs, from the demand side, depositors demanding cash
all
at once at the bank, which had been the typical bank run scenario in
the depression of the early 1930's. The mechanism to do this was
deposit insurance so that even if a bank locks its doors, your
deposits are covered up to the insurance maximum and you will be paid
your money from the insurance fund. At the time of the WaMu seizure
the insurance covered up to $100,000. In large part due to the WaMu
catastrophe the FDIC has implemented a temporary increase in the
amount of deposit insurance, and it is now $250,000 until Dec 31,
2009, unless extended. The Chairman and four Board of Directors of
the
FDIC are all appointed by the President and confirmed by the Senate,
with no more than three being from the same political party. The FDIC
is self funded through its insurance premiums, which are paid by the
banks. The FDIC has an immediate $30 billion line of credit with the
US Treasury, and procedures are in place if more credit is needed.
From 1996 - 2006 the FDIC waived the collection of the bank insurance
premiums as it was at the upper limit of its legal reserves.

The Federal Reserve system was created in 1913. One primary reason
for
creating the Federal Reserve was to prevent bank runs, from the
supply
side, the running out of cash at the bank, which had been a problem
causing bank runs in the recession of 1907. The mechanism for doing
this is by the banks loaning liquidity to each other in a process
called Federal Funds, which is short for Federal Reserve Funds. Then
there is a process of a bank borrowing straight from the Federal
Reserve called the Discount Window. The Federal Reserve is a private
corporation whose stockholders are the biggest banks in the country.
The Chairman and the six Board of Governors of the Federal Reserve
are
all appointed by the President and confirmed by the Senate. This is
the legal extent of the Governments involvement with the Federal
Reserve. Thus the government has weak control over the actions of the
Federal Reserve. All banks in America are members of the Federal
Reserve System. All paper money is printed by the Treasury per the
amounts ordered by the Federal Reserve. All electronic money, wires,
credit cards, debit cards etc and all check book money, is under the
monetary policies of the Federal Reserve. The Federal Reserve
controls
how much money, (cash, electronic, check book) banks have on hand
through its regulations and membership requirements. It maintains
this
flexibility so that it may meet the liquidity demands of banks.

WaMu was the largest thrift in America and part of the Federal
Reserve
System. WaMu had some no pay and slow pay mortgage loans, like most
banks in America today. These loans were not an overwhelming problem
for WaMu, as they had enough cash reserves on hand to last two years
at the current bad loan rate.

On March 10, 2000 the Dot Com bubble burst. The Federal Reserve began
lowering interest rates to make borrowing more attractive, to
stimulate the economy out of the slump caused by the Dot Com bubble
bust. On September 11, 2001 there was the WTC-Pentagon 9-11 tragedy,
and the Federal Reserve continued lowering interest rates to keep the
economy moving. On July 30, 2000 the Federal Funds rate was 7.03% and
by July 30, 2003 it was 1.03%, a drop of six points or 85.7%. The
swing from March 2000 was probably wider, but the data older than
July
2000 could not be found. People saw this as a good time to ...