Judge Approves $37 Million Washington Mutual Bankruptcy Settlement

A bankruptcy judge Tuesday tied up a remaining loose end from the 2008 collapse of Washington Mutual Bank, endorsing a $37 million settlement of the company’s claims against its former leaders.

Judge Mary Walrath signed off on the settlement at a hearing in the U.S. Bankruptcy Court in Wilmington, Del., where the failed thrift’s corporate parent, Washington Mutual Inc., took refuge in 2008.

Regulators seized the troubled subprime lender and sold it to J.P. Morgan Chase & Co., adding to the shaking of the U.S. financial system.

Once a staid savings and loan, Washington Mutual became an enthusiastic participant in the home loan boom, creating what a Senate panel later called a “time bomb” doomed to blow up in investors’ faces.

The settlement approved Tuesday ends some of the litigation over who was to blame for Washington Mutual’s failure including legal fights with insurance companies that balked at paying.

Washington Mutual’s trustees accused the company’s leaders of neglecting their duties to look out for the parent company.

For example, they sought to recover $500 million of parent company funds that were diverted to prop up the finances of the thrift. The thrift, and the $500 million, fell into the hands of regulators.

Read on.

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