NEW YORK (
Federal Deposit Insurance Corp.
are fighting in court over who might face consequences from a lawsuit by a unit of
Deutsche Bank AG
, according to a
A unit of Deutsche Bank is suing as a trustee for customers who purchased mortgage-backed securities issued by Washington Mutual Bank before it was shut down by the Office of Thrift Supervision September 2008 and then sold by the FDIC to JPMorgan Chase.
JPMorgan is saying that when it purchased Washington Mutual Bank from the FDIC, it was only "liable for explicit liabilities in the contract," while the FDIC has said that "without question,
JPMorgan succeeded to all of WaMu's interests, rights, obligations, and liabilities," according to the Dow Jones report.
JPMorgan also argued that even it is ultimately liable for misdeeds on the part of Washington Mutual, "Deutsche Bank's unit doesn't sufficiently prove that the so-called reps and warranties of the bonds, the basic agreements the investors and WaMu signed, were broken and broken willfully," according to the report.
According to a separate report by Puget Sound Business Journal, shareholders of
Washington Mutual, Inc.
-- the failed thrift's former holding company - have filed letters in bankruptcy court in Delaware, to prevent the approval of a bankruptcy plan for the holding company that would leave the shareholders empty-handed, while payout-out $6.5 billion to Washington Mutual's note holders.
Part of the shareholders' arguments are that the FDIC should never have shuttered Washington Mutual Bank in the first place. The shareholders also argue that the law firm Weil Gotshal & Manges had a conflict of interest, as it represented both JPMorgan Chase and holders of Washington Mutual's debt, according to the report.
Written by Philip van Doorn in Jupiter, Fla.
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Philip W. van Doorn is a member of TheStreet's banking and finance team, commenting on industry and regulatory trends. He previously served as the senior analyst for TheStreet.com Ratings, responsible for assigning financial strength ratings to banks and savings and loan institutions. Mr. van Doorn previously served as a loan operations officer at Riverside National Bank in Fort Pierce, Fla., and as a credit analyst at the Federal Home Loan Bank of New York, where he monitored banks in New York, New Jersey and Puerto Rico. Mr. van Doorn has additional experience in the mutual fund and computer software industries. He holds a bachelor of science in business administration from Long Island University.