Recent Items

Slimin’ Jamie Dimon’s Scheming to Stick the FDIC with WaMu Losses

Posted on by

It’s really easy to have a fortress balance sheet if you can get other people to eat your losses.

It’s also how some scandals are picked up and amplified by the media while others lie fallow. The London Whale scandal, which was never going to rise to the level of bank-threatening losses, did reveal JP Morgan to have grossly deficient risk controls and Dimon to be arrogant, lackadaisical, and dishonest in dealing with the problem. Predictably, regulators have refused to acknowledge serious Sarbanes-Oxley violations. And Dimon, who loves to take personal responsibility for JP Morgan’s successes, rapidly threw members of his laxly-managed Chief Investment Office under the bus to salvage his reputation.

We’ll go into more details on JP Morgan’s WaMu machinations below. The very short version is this story came to the fore last year, when Deutsche Bank filed a putback suit against both JP Morgan and the FDIC for dud loans in 99 WaMu mortgage securitizations (recall that when a mortgage backed bond is found to have worse merchandise in it than than the investors were promised, the trustee is supposed to put the bad loans back to the originator and have them replaced with good loans or get cash compensation. The Deustche Bank suit was noteworthy because trustees normally do nothing). The FDIC has made a compelling case that WaMu is no longer its problem and JP Morgan assumed the relevant liabilities.

Yet we’ve been told that in the next few weeks, JP Morgan is about to enter into a settlement with Deutsche Bank regarding…hold your breath….the liabilities it insists sit with the FDIC. I’m not making this up (the source is legally savvy). I’m not even sure how you paper up something which is so clearly nonsensical.

This looks to be a larger scale version of the strategy it entered into with billionaire Len Blavatnik. Blavatnik’s operating business Access Industries hired JP Morgan to manage the cash it had sitting around among its various entities, which was roughly a billion dollars. The agreement called for it to be conservative, remain very liquid, and it also limited the amount that could be invested in any asset type. In 2007, JP Morgan quit sending timely account statements and quit providing straight answers on what was happening with the cash management account. It turns out it stuffed it full of toxic mortgage dreck. Blavatnik lost $100 million, which is just unheard of for that sort of vehicle. If JP Morgan had apologized and written a $20 million check, I suspect Blavatnik would have been satisfied. Instead, the bank continued to be uncooperative and Blavitnik sued, and he is not the litigious type.

At least on the surface, the bank’s strategy isn’t even remotely economically rational. Blavatnik is one of the 100 richest men in the world and had been a JPM private banking client, plus he does lots of deal and hence also generates a lot in the way of transaction fees. The bank simply tried to make the litigation as protracted and costly for him as possible: it put three costly lawfirms against Blavatnik’s one. I met with Blavatnik and his general counsel early on in the discovery process (Blavatnik had been a client roughly 20 years ago on an oddball acquisition he made in the US) and they made it clear then that even with the bank stonewalling on delivering information, what they had gotten so far was so damaging that they were unlikely to settle for much less than the amount they were seeking at trial. And they’ve just concluded trial.

Blavatnik spent $10 million on the lawsuit. JP Morgan has to have spent more given how many big ticket law firms it threw at the case. And it will still probably have to write a very large check. The bank increased its ultimate losses considerably. Settling after things got ugly but before Blavatnik felt he had to sue would still have been vastly cheaper for the bank. And for what purpose? To defer recognizing the losses by eighteen or twenty-four months? Is JP Morgan that desperate to manage earnings that it will engage in patently lousy “investments” (investing in litigating) to delay recognizing losses?

With the WaMu matter, we again have what looks to be a desperate attempt to delay loss recognition. It is hard to see how Slimin’ Dimon has a leg to stand on. Senator Levin, are you paying attention? The $6.2 billion in London Whale losses are similar in size to the range of likely losses that JP Morgan is trying to dump on the FDIC.

Now the background. Remember, JP Morgan bought WaMu from the FDIC in 2008 after the bank failed. The receivership wiped out the equity; the FDIC also, controversially, wiped out the subordinated debt as well (John Hempton has railed that this was unfair and unwarranted; Dimon’s desire to retrade the deal even with that concession should lead him to rethink that assessment).

The purchase and sale agreement is below.

WaMu Purchase and Sale Agreement by

Note Section 2.1:

Liabilities Assumed by Assuming Bank. Subject to Sections 2.5 and 4.8, the Assuming Bank expressly assumes at Book Value (subject to adjustment pursuant to Article VIII) and agrees to pay, perform, and discharge, all of the liabilities of the Failed Bank which are reflected on the Books and Records of the Failed Bank as of Bank Closing, including the Assumed Deposits and all liabilities associated with any and all employee benefit plans, except as listed on the attached Schedule 2.1, and as otherwise provided in this Agreement (such liabilities referred to as “Liabilities Assumed”). Notwithstanding Section 4.8, the Assuming Bank specifically assumes all mortgage servicing rights and obligations of the Failed Bank.

A colleague of mine took a look at the P&S agreement and some of the filings last summer. He’s normally understated, so for him to get this exercised is a sign of how barmy the JP Morgan argument is. From his e-mail (and note that the indents in his message is where he is citing the FDIC’s filing. Emphasis his):

I went to dinner with some Wall Street lawyers last week and they talked at length about how the new regulations create so much uncertainty in the mortgage market (such as the “qualified mortgage” definition) and this is preventing the mortgage and securitization markets from recovering. In reality, the biggest obstacle to the mortgage securitization market recovering is the tremendous uncertainty created for investors by MBS litigation – investors have no idea what they are on the hook for and how much it will cost to enforce their rights. BS litigation like what JPM is arguing in this WaMu case is a big cause of this litigation uncertainty. WaMu signed up for a bunch of deals and JPM signed up to succeed them, and now JPM is trying to weasel out of it with stupid legal arguments (though argued by expensive attorneys) whose only purpose seems to be to delay the obligation that is clearly JPM’s.

In my view, this case is another piece of evidence that bitching and moaning about onerous regulations by the banks is just a smokescreen to cover their own damaging and irresponsible behavior.

It’s really outrageous that JPM is arguing, on one hand, that it is entitled to a one-sided sweetheart deal from the FDIC with WaMu, while complaining, on the other hand, that government regulations are strangling the mortgage market.

The arguments made by both Deutsche Bank and the FDIC in this case are straightforward and sensible enough. JPM’s position, however, makes little sense. I’m inclined to think they are just trying to waste time (and kick the can down the road) without any actual hope of winning. It is fairly ironic that in one of the few cases where the trustee has been willing to act on behalf of investors, JPM has managed to successfully muddy the waters for 4 years and avoid any liability.

The FDIC is quite clear that JPM purchased the rights and liabilities of WaMu in the transaction. They argue JPM is being disingenuous (ie lying) by claiming that the rep repurchase obligations were not mature (technically, the did not represent any “Book Value”) at the time of the WaMu sale and so they shouldn’t be JPM’s problem. This seems like a pretty strange defense by JPM. (To be clear, Deutsche Bank brought the claims against the FDIC because JPM argued that the FDIC was entirely on the hook for the rep and warrant obligations).

DBNTC’s claims against FDIC Receiver should be dismissed in their entirety, because FDIC Receiver transferred all of WaMu’s liabilities and obligations under the Governing Agreements to JPMC. Under the Purchase and Assumption (“P&A”) Agreement1 that JPMC and FDIC Receiver entered into when the Office of Thrift Supervision (“OTS”) closed WaMu on September 25, 2008, JPMC acquired WaMu’s ongoing banking operations in a “whole bank” transaction, “purchas[ing] substantially all of the assets and assum[ing] all deposit and substantially all other liabilities” of WaMu, for a purchase price of $1.9 billion. P&A Agreement at 1, Art. VI. JPMC expressly agreed to “pay, perform, and discharge” all liabilities reflected on WaMu’s books and records as of September 25, 2008, including specifically “all mortgage servicing rights and obligations.” Id. § 2.1. JPMC purchased “all” the assets of WaMu, including specifically “all the mortgage servicing rights and obligations,” id. § 3.1, and “all rights of [WaMu] to provide mortgage servicing for others . . . and related contracts,” id. Schedule 3.2. Further, the assets were purchased subject to “all liabilities” affecting those assets, as provided in Section 2.1. Without question, JPMC succeeded to all of WaMu’s interests, rights, obligations, and liabilities under the Governing Agreements, which, according to DBNTC, are for each Trust an integrated set of agreements governing the transfer of loans into the Trust, the securitization of the loans in the Trust, the servicing of the loans, and the rights and obligations of all the parties to the transaction.

Now, JPMC is attempting to rewrite history. The unambiguous terms of the P&A Agreement, which the Court may construe as a matter of law, demonstrate that any and all of WaMu’s rights, obligations, and liabilities under the Governing Agreements were transferred to and assumed by JPMC. Accordingly, FDIC Receiver can have no liability to DBNTC for any obligation owed under the Governing Agreements, whether arising before or after WaMu’s closure, and all claims against FDIC Receiver should be dismissed under Rule 12(b)(6).

The FDIC helpfully points out to the court that JPM has told its shareholders, repeatedly, that it was assuming WaMu’s liabilities, including rep and warrant liabilities, in the transaction.

Notwithstanding the plain terms of the P&A Agreement and the many benefits that JPMC has received from the acquisition of WaMu’s assets, JPMC has denied assuming any of WaMu’s liabilities under the Governing Agreements.25See Am. Compl. ¶ 91 (“JPMC further contends that ‘all other liabilities of [WaMu], including the DBNTC liabilities, remain with [FDIC Receiver].’”) (quoting 8/25/10 letter from JPMC counsel to DBNTC counsel) (emphasis in original). JPMC’s public statements both before and after the WaMu transaction, however, belie this denial, and instead evince a clear awareness that those liabilities were reflected on WaMu’s books and records prior to its closure and transferred to JPMC along with all of WaMu’s rights, interests, and obligations under the Governing Agreements.
JPMC’s public filings after the P&A Agreement make repeated reference to its assumption of WaMu’s rights and responsibilities under the Governing Agreements. When discussing its accounting for the WaMu transaction in its 2008 Form 10-K, for example, JPMC noted that the liabilities it had assumed include WaMu’s “executory contracts and other commitments.” Elsewhere in that Form 10-K, in presenting data about its residential mortgage securitization activities, JPMC included the principal balances of the loans in securitizations sponsored by WaMu in a table displaying “the total unpaid principal amount of assets held in JPMorgan Chase-sponsored securitization entities . . . to which the Firm has continuing involvement” such as ongoing repurchase or indemnification obligations.

Indeed, in the “Risk Factors” section of a December 2009 prospectus supplement, JPMC forthrightly discussed its potential exposure resulting from its assumption of WaMu’s repurchase and indemnification obligations. Under the heading “Defective and repurchased loans may harm our business and financial condition,” JPMC stated:

In connection with the sale and securitization of loans (whether with or without recourse), the originator is generally required to make a variety of customary representations and warranties regarding both the originator and the loans being sold or securitized. We and certain of our subsidiaries, as well as entities acquired by us as part of the Bear Stearns, Washington Mutual and other transactions, have made such representations and warranties in connection with the sale and securitization of loans (whether with or without recourse), and we will continue to do so as part of our normal Consumer Lending business. Our obligations with respect to these representations and warranties are generally outstanding for the life of the loan, and relate to, among other things, compliance with laws and regulations; underwriting standards; the accuracy of information in the loan documents and loan file; and the characteristics and enforceability of the loan… Accordingly, such repurchase and/or indemnity obligations arising in connection with the sale and securitization of loans (whether with or without recourse) by us and certain of our subsidiaries, as well as entities acquired by us as part of the Bear Stearns, Washington Mutual and other transactions, could materially increase our costs and lower our profitability, and could materially and adversely impact our results of operations and financial condition.

This is a pretty amazing “gotcha”. Not only does the Purchase & Sale agreement pretty unambiguously leave JP Morgan on the hook for the representation and warranty liabilities, JP Morgan clearly told shareholders it was assuming representation and warranty liability with respect to WaMu.

It made more statements to that effect. For instance, in SEC reports discussing 2010 earnings:

….we and certain of our subsidiaries, as well as entities acquired by us as part of the Bear Stearns, Washington Mutual and other transactions, have made such representations and warranties in connection with the sale and securitization of loans (whether with or without recourse… Our obligations with respect to these representations and warranties are generally outstanding for the life of the loan, and relate to, among other things, compliance with laws and regulations; underwriting standards; the accuracy of information in the loan documents and loan file; and the characteristics and enforceability of the loan…. if a loan that does not comply with such representations and warranties is sold, we may be obligated to repurchase the loan and bear any associated loss directly, or we may be obligated to indemnify the purchaser against any such loss.

It again acknowledged its responsibility for the WaMu reps and warranties in a February 28, 2011 SEC filing for all of 2010. It wasn’t until 2012 that it tried backpedalling from this position, as even Deutsche Bank noted in court filings:

JPMC, by its own post-acquisition actions, evidenced an understanding that it is liable for all other liabilities reflected on WaMu’s books and records….JPMC’s own statements and actions were inconsistent with its current position, but very much consistent with the plain reading of the PAA advanced by the FDIC and the Trustee.

The reason to go into this case at such length is to puncture the myth that Dimon has managed to perpetuate. In a more sober time, the astonishing qualifications that JP Morgan’s auditors issued to its financial statements in the wake of the London Whale trading debacle would have finished most CEOs. But this is also a time in which people like Angelo Mozilo and Jon Corzine not only have not been prosecuted, but have most of the money they earned while driving their enterprises into the ditch intact. I strongly suspect that the reason Dimon has gotten away with so much is that he is running the ultimate too big to fail institution. JP Morgan’s standing as one of the biggest derivatives clearing shops makes it too critical to allow it to even wobble. But the fact that JP Morgan has wound up at such a critical financial nexus is not excuse to allow Dimon to remain so firmly attached to its helm.

Print Friendly
Twitter48DiggReddit0StumbleUpon0Facebook109LinkedIn0Google+1bufferEmail

42 comments

  1. from Mexico

    How long will Obama, his Department of Injustice and technocracy be able to run interference for the likes of Dimon, Mozilo and Corzine?

    I didn’t think it would be possible to get any worse than Bush, but we seem to have succeeded.

    Will they be able to hold then line when the next leg down of the GFC comes?

    1. Dan Kervick

      Hi Mexico,

      I don’t know if you had a chance to read Bill Black’s latest piece at NEP. It’s quite long. But it outlines the astonishing amoralism and degradation of the regulatory function of government under the Clinton administration and its “reinventing government” agenda. The Obama administration is anchored in the same core group of financial backers and apparatchiks, and so appears to be a continuation of the miserable Clintonian trend of giving tolerant latitude to predators.

      http://neweconomicperspectives.org/2013/02/reinventing-government-the-1995-speeches-announcing-the-road-to-ruin.html

      1. from Mexico

        Wow!

        In our search for goodies and badies, it seems like its been all badies for the past 30 years when it comes to presidents.

        Is this another Gilded Age or Roaring Twenties, or is it the real thing this time: “The Weary Titan staggers under the too vast orb of its fate.”

        And when through an ancient and still powerful state there spreads a mood of deep discouragement, when the reaction against recurring ills grows feebler…when learning languishes, enterprise slackens, and vigour ebbs away, then…there is present some process of social degeneration, which we must perforce recognise, and which, pending a satisfactory analysis may conveniently be distinguished by the name of “decadence.”

        ARTHUR J. BALFOUR, Lecture on “decadence” at Newnham College, January, 1908

  2. DP

    “Blavatnik spent $10 million on the lawsuit. JP Morgan has to have spent more given how many big ticket law firms it threw at the case. And it will still probably have to write a very large check. The bank increased its ultimate losses considerably. Settling after things got ugly but before Blavatnik felt he had to sue would still have been vastly cheaper for the bank. And for what purpose? To defer recognizing the losses by eighteen or twenty-four months? Is JP Morgan that desperate to manage earnings that it will engage in patently lousy “investments” (investing in litigating) to delay recognizing losses?”

    Just a guess, but I’d guess JPM took this course of action to send a signal to others in the same situation as Blavatnik that they better have very deep pockets if they want to fight JPM in court. If they had just settled and made Blavatnik whole, how many others would be standing in line behind him?

    1. diptherio

      I think you could be on to something there.

      My father is a retired DOT oil and gas pipelines inspector. He was continually shocked by the minor violations and fines he would write up that the big oil companies would spend years litigating, even if the violation was a matter of simple, unquestionable fact and the fix a fairly minor. He said it seemed like the companies would appeal every violation, just on general principle.

      It didn’t make any sense in the short-run, as a strict matter of profitability, but it did serve to frustrate the regulators. Some, less tenacious than pops, might have decided that writing up small violations just wasn’t worth the effort. I bet something similar is going on here, too.

      Either JPM is in such dire straits that it’s cannibalizing itself to stay alive, as Yves suggests, or they’re sending a message to other potential adversaries that they are willing to expend ungodly amounts of money on even the most cut-and-dry lawsuits, even if that means making patently absurd arguments in court.

      That last, btw, seems to be a new competitive sport among bank attorneys. I imagine they have a betting pool going for who can write the most ridiculous motion.

      1. from Mexico

        Noam Chomsky calls it the “Mafia Doctrine”.

        If a storekeeper fails to cough up protection money, the boss may not care about the money, but he does care about the example. It may inspire other storekeepers to cut loose of the Don.

        Similarly, allowing a successful experiment in democracy to flourish – whether at an Occupy Camp in NY, or in a tiny nation like Grenada – may set a good (ergo, bad) example for larger populations.

      2. Nathanael

        This is a really bad strategy. What it’s gotten the oil & gas companies is the eternal hatred of the populace. This is going to destroy them sooner or later. But they were providing something which people were addicted to — cheap energy — so they could get away with it.

        People will be substantially more willing to abandon the financiers.

    2. Stelios Theoharidis

      Isn’t the basis of extend and pretend that JP Morgan and other banks can continue to collect money on the backs of American tax payers (implicit US bailout guarantee via TBTF) and savers (distorted interest rates) to pay off their poor and often fraudulent business practics yet still make a profit. The longer they extend the litigation the more profit that they can continue to make to make up for it. Basically the public pays their fraud, its defense, and for their profits through their government manipulation and rent seeking behavior. By the time the litigation has been concluded with the FDIC the public will have already paid for its costs and consequences. Excellent business model.

      1. Ms G

        “Excellent business model.”

        Indeed. And none too reliant on complex algorithms. A 6 year old kid figuring out how to scam a buddy could figure that one out.

      2. Maximilien

        “Excellent business model.”

        L = litigation (paid for by shareholders)
        O = obsfucation (of bad assets and losses)
        O = overcompensation (of executive officers)
        T = toleration (on the part of the government)

        That’s the business model.

    3. Yves Smith Post author

      Normally settlements are subject to (this is not the term of art) mutual gag orders. If they had settled before Blavatnik filed his suit, no one would have been the wiser. And trust me, there would have been a lot of heated conversations before that, you file a suit only after you have exhausted other options.

      So no one would have known about the settlement had they settled AND they might have kept a big ticket client.

  3. JS

    It should also be noted, that JPMC forecloses on WAMU originated mortgages as Successor in Interest to WAMU, and, in my case, assigned my 2006 mortgage to one of the trusts specified in this suit, in 2009, THREE YEARS AFTER the trust was closed, as “JPMC, Successor in Interest to WAMU”. Chase claims to be successor in interest to WAMU when it suits them, and denies this role when it doesn’t.

    And of course, the late assignment of my mortgage to the trust violates both the deadlines specified in the PSA, and the requirement that non-performing loans cannot be included [I was 3 months behind on payments at the time of the assignment]. … and my home was fraudulently appraised by WAMU at almost 50% higher than its real value.

  4. Chris Engel

    Maybe Elizabeth Warren wasn’t too far off the mark with her comment that nobody trusts what the banks say (hence why they trade below BV)

    I keep feeling like we’re on the cusp of either a major recovery or a major floundering. Leaning toward the latter given the fiscal incompetence of the US congress (particularly GOP-dominated House).

    Wouldn’t touch any banks in my portfolio especially though.

    I just don’t know where all the money is going, bonds are in a bubble, stocks are getting bid up only because of cost-cutting measures (not higher sales), gold is selling off, real estate is picking up — but I don’t see how any fund flows will lead to better employment or better performance in real asset markets for Americans.

    Internationally, Europe is off the table with all the insanity due to hit in Greece/Spain/Italy as the labor market crisis continues there. China is still a bit closed off and sketchy, the AUD and NZD carries are being swallowed by aggressive central bankers over there, and it seems like almost ivnestors will be FORCED to take a chance on the “real economy” since there’s nowhere else for funds to go.

    But with banks like these, only government can really save us from this mess. Banks aren’t interested in creating loans to new businesses in a demand-deficient environment. Playing numbers games is the better business than developing the real economy. They risk billions in the london whale crap but they won’t risk the money helping to fuel growth in the country instead?

    1. Nathanael

      “Maybe Elizabeth Warren wasn’t too far off the mark with her comment that nobody trusts what the banks say (hence why they trade below BV)”

      Bingo. The book value of the banks is so phony no real investor will touch them. I have also made very assiduous efforts to rid my portfolio of bank stocks, to the point of getting rid of mutual funds which contain bank stocks.

  5. down2long

    Yvwa, Love the “Slimin’” moniker. I want to feel that with Labert’s guidance, I had something to do with that.

    As JS says, Chase is trying to have it both ways – getting $40 Billion in free WaMu loans – which they are anxious to foreclose and cash out – and of course have no liability for any bad loans or actions. Private profits, other people’s losses.

    As I have posted here before, JPM was anxious to foreclose on my current and paid up – but termed out – commercial loan. Which netted them $601K in cash, and a $350K loss from the loan balance and above market interest rate which was what the stock holders lost in opportunity costs.

    The building was paying for itself, but to add insult to injury, I just got the 1099 that called the $350K loss to me as forgiven income.

    Thank God for Blatavik – I fought the bastid for five years but eventually lost. Glad he’s around.

    We have very strict rent control laws in Los Angeles. You cannot kick out more than one tenant in a building after a foreclosure, and even then you have to pay them up tp $18 to move. Other than that you can raise their rent 3%.

    Having been in business in L.A. 15 years I know the laws well. Suffice it to say when Chase’s receiver took over the building they found some VERY happy tenants with shiny new leases and a building grossing a third of what it had been.

    And OMG was the new owner mad at ME when he bought the bldg. at auction and it turns out the BANK lied to him about the rent roll. He tried to sue ME! What a riot. I love when rich people fuck each other.

    Salt the earth the and poison the water for the victor. Fuck Chase. Cut Slimoin’ in ten pieces and deposit a piece inb each circle of hell.
    il

    1. Yves Smith Post author

      Yes you did and apologies for not crediting you both. It’s not easy to do in a headline but I should have made note somewhere in the post.

  6. down2long

    Sorry – my kitty’s on my lap and my typing suffered. The new owners have to pay the tenant up tlo $18K to move, and then can only move in to the unit themselves as owner-occupiers, and must submit affadavits for two years to that affect. Bad law for owners, great for revenge.

  7. Brian

    Yves; Someone is deceiving you. The FDIC has recently admitted the PA agreement is 118 pages long as Mr. Nardi and Mr. Thorne both testified to under oath in depositions, having worked for WaMu and the FDIC, and one moving to JPM. The FDIC actually agreed to show the 118 page PA agreement in court in the Jolley case, but demanded a confidentiality agreement that the plaintiff did not wish to comply with. The FDIC is said to have guaranteed 80% of the loans as well. Loans only serviced by WaMu in many cases. Scott Jolley v. Chase Home Finance; CIV 1002039, JPMorgan Chase Bank, N.A. v. Sherone D. Waisome, et al, Case 2009 CA 005717.
    Since the PA agreement appears to be written by JPM, an “action of law” is unlikely to be appropriate, and has been denied by one court already. Since WaMu was a failing institution years before it’s demise, the assumption that they kept loans they could sell for desperately needed cash flow seems unlikely at best. I think the true facts are more entertaining based on the few that have come forth to date.

    1. dolleymadison

      Brian can you further elaborate what this means to the homemowner fighting JPMC in foreclosure? Thanks!

      1. Brian

        Hi Dolley; I am not an attorney, so I can only give you information. If you had a WaMu loan, chances are, JPM had nothing to do with it but servicing rights, and those may or may not be valid. WaMu sold it’s loans to Freddie or Fannie last century, and then direct to depositors for trusts after that. Look for gaping holes in the chain of title. Your state laws are going to be most important. It is “unlikely” JPM has any claim on a WaMu loan unless it resides in a pool where JPM was involved, and JPM have denied having any ownership of a WaMu loan when defending against charges by fellow banks. Both depostions of Lawrence Nardi and Jeffrey H. Thorne are packed with contradictions to JPM’s claims. Each have stated under oath that there are no documents regarding any loan sale included in the so called receivership via the FDIC. These two sites are best for new information; http://stopforeclosurefraud.wordpress.com The most up to date news, and; http://livinglies.wordpress.com

    2. Yves Smith Post author

      No, I ran that post by multiple attorneys when it came out and they said this is not correct. The FDIC is not permitted to do deals with secret riders.

      Someone under deposition may be saying what he thinks is truthful, but that does not mean he is accurate.

      Plus as indicated in the text, JPM repeatedly said in public statements, including SEC filings, that it was responsible for WaMu rep and warranty losses. Plus the FDIC in court filings said the same thing. The FDIC would not dare lie to the court as in say something contradictory to written agreements it had entered into. The judge would throw the book at them. You don’t lie to the court (unless you are a big bank servicer fighting itty bitty homeowners), particularly if the other side could produce documentation showing you were untruthful.

      In addition, a court proceeding almost voids any confidentiality provision. JPM would have produced any such agreement by now if it actually existed.

      1. Brian

        FDIC has claimed it was an “act of law” when it was a negotiation where JPM chose their terms. I believe the Michigan Supreme court said not in our state, an “act of law” is clearly defined and the receiving party has no say in the matter. JPM has lied to courts since 2008 because someone very large has been at their back, and the parties that claim JPM is only servicing the loan can’t prove the loans exist. Recall that WaMu destroyed original loan documents, some put them at 90%, the Houston TV story about the lost shipment going to Mexico and the industrial grade shredders. What if they have to lie to the courts because they and their cohorts believe they are the only entity with a big enough stick to do so and get away with it. It only means the collapse of their company and all the related claims of debt right? The Deutsche Bank suit has a denial on record from JPM that they own the loans originated by WaMu that JPM populated the “pools” that are subject to the claims by DB. Many of us know this because we have multiple parties in the chain of title that still claim to own the same thing JPM claims. SEC records show quite a different story. For those of us that have had some of this info for 4 years, it is finally coming out and it can’t be stopped. The Jolley case is compelling of itself.

  8. deontos

    An Appellate Court has RULED for a homeowner in a stinging rebuke of its district Trial Court and JPMC.

    There is a N*E*X*U*S here of GREAT import between the homeowners treatment by JPMC and the PUTBACKS Controversy. JPMC is apparently fighting a “rearguard action” against the homeowners attempting to TERMINATE them and thereby LIMIT their looming putback exposure. They know they can’t win against the FDIC and DBNTC but they can STALL. Then LIQUIDATE the homeowners (profitably and illegally) and use those funds to finally settle with the “900 Pounders”

    By the way, when the rich f*ck the rich the little guy is still “out of luck”. The JPMC-DBNTC-FDIC litigation is for the most part all filed under SEAL.

    . . . . . . . . . . . . . . . . . . . . . . . .

    [02/11] Jolley v. Chase Home Finance

    Summary judgment for defendants on dispute following foreclosure
    on construction loan agreement reversed and remanded as to
    defendant bank who purchased assets of the bank that entered into
    the loan agreement, where:

    *******************
    1) the trial court improperly rested its holding on the terms of a shorter, disputed version of the Purchase and Assumption Agreement submitted by defendant;
    *******************

    2) prolonged miscommunication about a possible loan modification raises a triable issue of fact of intent by defendant bank to profit by misleading plaintiff about his loan modification prospects;

    3) a triable issue of fact exists whether defendant bank has potential liability for its own conduct under a theory of promissory estoppel;

    4) there is a triable issue of material fact as to a duty of care to plaintiff, which potentially makes defendant bank liable for its own negligence;

    5) triable issues of fact exists as to whether defendant bank’s conduct was fraudulent or unfair for the purposes of the unfair competition claim;

    6) a triable issue of fact exist as to the reformation claim; but

    7) summary adjudication for defendant bank on the declaratory relief and accounting causes of action was proper.

    x_http://caselaw.findlaw.com/ca-court-of-appeal/1622404.html

    . . . . . . . . . . . . . . . . . . . . . . . .

    On Scribd:

    Secret FDIC and JPMorgan Chase Bank 118 Page Purchase and Assumption Agreement for Washington Mutual Bank

    Non Public Document disclosed in Sworn Testimony indicates JPMORGAN CHASE and FDIC are concealing material information regarding
    the JPMC purchase of WAMU. The FDIC so far REFUSES to release the document unless under a draconian protective order forbidding ANY
    disclosures by any of the involved parties in the court case INCLUDING the judge.

    x_http://www.scribd.com/my_document_collections/3675055

  9. Blurtman

    Sooner or possibly later, I have to believe the average ‘Merican will come to realize that one reason the gubberment can’t fund social programs is because billions went towards paying off the banks’ bad debts. I think if this can be concretely and directly communicated to J6P, we might have a fighting chance at changing things.

    1. jrs

      Yea, I suspect this is the case but have never found the proof myself, I think we need raw figures. Money buying bad bank assets (QE3) that could be used to fund a more social purpose. Money banks earned in interest on treasuries from money they borrowed from the Fed (why not just lend to the government directly then) Etc.. Compared to the size of supposedly (and it’s the argument the right makes and will win if unchallenged) unsustainable entitlement liabilities for things such as Social Security.

      1. didhedidhe

        Yes, much as I wish it were different, have never seen a clear accounting. The best is opportunity-cost things like the low rates for savers. This isn’t enough.

        Then all the figures you’ve heard, like $7T, or $14T, seems vapor when you try to figure them out. Then the Fed says they gave next to nothing away.

        Then I hear they’re buying toxic assets, but never seen a reliable accounting. I’ve looked at that table on the famous website that totals it, but can’t tell what is _actual payments, gifts, or bailouts_in hard dollars_.

        Makes the whole argument dicey. Most people don’t have the slightest idea what and how it means if the banks were bailed out, me, despite years of following it, included.

  10. Susan the other

    Fun-nee. And all to delay recognizing its losses for a couple of years. How will 2 years help JPMC? Clever, settling a liability you claim you don’t own.

  11. Gil Gamesh

    Dimon should hire himself out as a hit man, given his privileged, immunized status at the pinnacle of the Job Creator Class (or JC Class…think that was an accident, pilgrim?).

    Chase was godawful pre-Dimon. Jamie the Shark from Quuens has taken it down to a whole new level of bad-ass.

    When G W Bush gets hanged, and Dimon sent to prison, then the rule of law might have returned to this very sorry Banana Plantation Republic.

  12. craazyman

    This is great stuff if this is the stuff you like, but I can’t get my brain to finish it.

    I lose track, I drift off, I can’t follow the acronymns or the legal terms of art, I get hopelessly confused, lost wandering in paragraphs that close in like a darkness over street signs in a foreign language, then my mind is suddently staring at my desk. That embedded PDF beckons like a cliff asking to be jumped off. Oy Vey.

    This is the problem with contemporary finance. It’s so complex and convoluted that only special brains and securities lawyers can make any sense of it. The rest of us, we’re toast. It fades away and then it disappears completely and there’s only real life, the faces on the street.

    It’s no wonder financial crimes get wrist slap fines. Putting this in front of a jury would probably be too much even for top securities litigators with Aspergers syndrome. Nobody could take the pain. It would maim the judge. It would kill the jurors. Only the defendants would walk away unscratched, since they figured out the bezzle in the first place, and their lawyers, if they survived, would be wealthier by millions. As if they need it. It’s an addiction. It’s all they know. More and more and more. Make the knot so tight you need another dimension to tighten more.

    Anybody that can understand this must be so strange medical science should investigate their brains. 12 jurors of their peers. 25 week trial. Death in every direction. Death by mental bludgeoning. No weapon found.

  13. Ms G

    “Slimin’ Dimon” is a keeper. I will tag it to its true owner whenever I speak or write his name.

    Nice one, Yves!

  14. Knute Rife

    Can someone remind me why WaMu has losses? Oh yes, now I remember. JP Morgoth jolly-rogered WaMu to grab its assets to shore up its own balance sheet, leaving behind a sinking hulk. And Diamond Jamie has gotten away with it, just as his EVP/AGCs in Chicago and New York have gotten away with lying through their teeth in every case they’ve litigated.

    1. Rob Harrington

      Actually, JPMChase was paid a PROFIT to take “certain assets” from WAMU from The FDIC. FDIC’s and JPMChases’ exposure from WAMU would have seriously hurt them if WAMU were to have tanked. If WAMU’s assets were determined to be around 300,000,000,000.00 and JPMOrgan Chase only “paid” 1.88 Billion, then JPMorgan Chase only paid a third of a PENNY on the dollar. Next, realizing billions in tax deferments and funny GAP accounting measures for future profit on balance sheets, JPMorgan Chase actually was paid to take WAMU off of the FDIC’s hands… Bury WAMU’s fraud and screw the defrauded homeowners, shareholders, Investors in the WAMU Trusts holding servicing rights (only) to a million(plus/minus?) home loans “originated” by WAMU, most (70%?) which were most likley “defective” (fraudulent/illegal/unenforceable,) then JPM Chase has so far been very successful and profitable while knowingly having unclean hands, and unjust enrichment issues with defrauded WAMU homeowners. WAMU was a coup d’tat as evidenced in the TEXAS COMPLAINT (WAMU Bankruptcy)AKA WAMU Bondhlders vs JPMorgan Chase. http://www.bloomberg.com/news/2013-01-07/jpmorgan-seeks-liability-shield-in-wamu-bondholder-suit.html. The case is American National Insurance Co. v. Federal Deposit Insurance Corp., 09-cv-01743, U.S. District Court, District of Columbia (Washington). In this case, the Bondholders claim That JPM Chase sent Rotella, and others over to WAMU in 2005 and for the next 3 years later, to obstensively run WAMU off the cliff to force a takeover by the now shuttered (crooked or inept?) OTS who would hand deliver WAMU to the FDIC. What a brilliant scam. Somebody ought to be going to prison for this deal (RICO.) The OTS was just another continuation of another “lax tregulator” of the S&L scandal days. Smell the decomposition of “murdered” WAMU homeowners here by any chance? http://en.wikipedia.org/wiki/Office_of_Thrift_Supervision

  15. Alan Sporn

    There is substantially more to the Purchase & Assumption Agreement between the FDIC and JPMorgan Chase Bank respecting WaMu.

    Although the P&A Agreement is dated September 25, 2008, there exists an Amendment to Article 1, “Final Settlement Date” dated 6/18/2010 whereby the actual closing date was extended to August 30, 2010 – 2 years later.

    This would mean that immediately after JPMorgan Chase took control of WaMu’s assets, they started foreclosing the following month. Of course, in addition to the unlawful foreclosures, JPMorgan Chase Bank also took over all the bank accounts, CD Deposits, Savings Accounts, etc., and 2 months later fee’s were raised and interest bearing bank accounts were no longer interest bearing.

    I would say that a $50 million deposit check to the FDIC for all of WaMu’s assets, less liabilities (yet to be defined) was an incredible opportunity for JPMorgan Chase Bank, considering this deal was not final until 2 years after the fact!

  16. Mike Maunu

    Rob, I know this is what everyone continues to say, “If WAMU’s assets were determined to be around 300,000,000,000.00″

    However, this is not accurate, nor are any of these banks balance sheets. These banks never booked these transactions as assets with a corresponding liability and if they did they were committing fraud. It’s estimated that 70 – 80% of WAMU’s mortgage transactions were table-funded. WAMU never loaned a dime and only took a commission on the transaction.

    And oh btw, any table funded loan is predatory and violates TILA among other things because the true creditor has not been disclosed. There are also huge yield-spread premiums that were siphoned off and sent off-shore.

    The only thing of value that JPMC got were the “alleged servicing rights” because they can’t even prove they got those from WAMU which has been recognized in a few court cases. The servicing rights gave them the right to steal monthly payments from homeowners on loans that had already been paid off. Then they foreclosed on the homeowners when they couldn’t make the payments and JPMC got a FREE house…lmao!!!

    This is why I’m still wondering why so many think the banks needed to be bailed out. They were already paid in full for the “loans” and the only exposure they would have had in the collapse was for put backs which very few have done and then pennies on the dollar. Or like JPMC they continue to fight 4-years later while collecting payments and selling foreclosed homes they paid .03 cents on the dollar for.

    The fraud is so pervasive and runs everywhere you turn. This is why a total collapse is eminent and the only thing that makes sense…..

  17. Nathanael

    Yves, to answer your rhetorical questions:

    “Settling after things got ugly but before Blavatnik felt he had to sue would still have been vastly cheaper for the bank. And for what purpose? To defer recognizing the losses by eighteen or twenty-four months? Is JP Morgan that desperate to manage earnings that it will engage in patently lousy “investments” (investing in litigating) to delay recognizing losses?”

    Every quarter when corporate earnings are “managed” is another $10 million or so into Jamie Dimon’s *personal* account. Remember, the CEOs manage the companies NOT for the benefit of the stockholders, or the firm, or the employees, or the general public, but for *their own personal benefit*. This is because they are psychopaths.

Comments are closed.