WaMu Bondholders Lose Case Against JPMorgan

WASHINGTON (CN) – JPMorgan Chase is not liable to Washington Mutual bondholders whose assets were rendered worthless when the bank failed in the 2008 financial crisis, a federal judge ruled.
Former bondholders of Washington Mutual Bank, or WaMu, sued JPMorgan Chase, the company that acquired WaMu’s assets when the bank collapsed after securitizing bad home loans that cost investors billions.
When it failed, WaMu was the largest savings-and-loan association in the U.S with more than $188 billion in deposits and 2,200 branches nationwide.
JPMorgan Chase bought WaMu’s assets and certain liabilities for $1.9 billion in 2009.
The purchase agreement signed by the FDIC and JPMorgan states that the company assumes and agrees to pay “all of the liabilities of the failed bank which are reflected on the books and records of the failed bank as of bank closing.”
However, WaMu investors’ bonds were not among the liabilities sold to JPMorgan Chase, and thus became essentially worthless.
In their lawsuit, “plaintiffs posited a conspiracy among JPMC, federal regulators, and some WaMu employees to drive down WaMu’s value and expose it to federal takeover,” according to a March 4 ruling from U.S. District Judge Rosemary Collyer.

Read on.

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