Status of Washington Mutual Bank Receivership
On September 25, 2008, the Federal Deposit Insurance Corporation (“FDIC”) was appointed the Receiver (“Receiver”) of Washington Mutual Bank ("WAMU"). The Receiver transferred substantially all WAMU's assets and liabilities to JPMorgan Chase Bank, N.A. ("JPMC") pursuant to a Purchase and Assumption Agreement dated September 25, 2008 - PDF("P&A Agreement"). WAMU, which was the largest failure of an insured depository institution in the history of the FDIC, had $307 billion assets, $188 billion deposits, and over 2,300 branches in fifteen states when it failed. The resolution of WAMU through the P&A Agreement was completed at no cost to the Deposit Insurance Fund.
Potential for Distributions to Subordinate Note and Equity Holders
On the day after WAMU failed, its holding company, Washington Mutual, Inc. ("WMI"), filed for Chapter 11 bankruptcy protection in the United States Bankruptcy Court for the District of Delaware (the “Bankruptcy Case”). WMI owned all WAMU shares of stock and was the sole equity holder of WAMU. The Receiver does not currently have and does not anticipate accumulating sufficient assets to pay in full all of the allowed claims of the general unsecured creditors of WAMU. As a result, the Receiver does not project having sufficient assets to make any distributions to WAMU subordinate note holders or equity holders. Therefore, it is unlikely that any distributions will be made to WMI or its successor on its claim as sole equity holder of the failed bank. Additional information about the WAMU receivership and its financial condition can be found at the following link: WAMU Quarterly Receivership Balance Sheet Summary.
After WMI filed the Bankruptcy Case, WMI, JPMC, the FDIC in its corporate capacity (“FDIC-C”), and the Receiver became involved in several lawsuits contesting the ownership of over $20 billion in assets.
The parties reached a settlement in the Bankruptcy Case that was approved by the FDIC's Board of Directors on May 20, 2010, and WMI filed a plan of reorganization incorporating the terms of the settlement ("WMI Bankruptcy Settlement"). Several parties objected to WMI's proposed plan, in particular, WMI's proposal to release its claims against JPMC, FDIC-C, and the Receiver. At the request of WMI's equity holders, the Bankruptcy Court appointed an examiner to thoroughly investigate WMI's claims against JPMC, FDIC-C, and the Receiver, and determine whether the proposed settlement (which would release these claims) was fair and equitable to WMI. The examiner found that the WMI Bankruptcy Settlement was a fair resolution.
On February 24, 2012, the Bankruptcy Court entered an order confirming the seventh amended plan - PDF proposed by WMI and its co-debtor WMI Investment Corp (the "Plan"). The WMI Bankruptcy Settlement - PDF, as amended from time to time, remains integral to and incorporated in the Plan. The Plan and Settlement became effective on March 19, 2012. The Receiver received $843.9 million pursuant to the terms of the WMI Bankruptcy Settlement.
Litigation filed by Deutsche Bank National Trust Co. (“DBNTC”) and JPMC and Settlement
Soon after WAMU failed, DBNTC sued the Receiver and JPMC, claiming $6 billion to $10 billion in damages arising out of WAMU's alleged breach of representations and warranties made in connection with mortgages sold to securitized trusts. (Amended Complaint - PDF.) In June 2015, the United States District Court for the District of Columbia issued a partial summary judgment decision finding that the Receiver retained liability for DBNTC’s claims to the extent that such claims were not reflected at a stated book value in the financial accounting records of WAMU as of the failure date. (Amended Memorandum Opinion - PDF.) The Receiver sought appellate review of the decision in the United States Court of Appeals for the District of Columbia Circuit.
Also, JPMC filed lawsuits and cross-claims seeking indemnification against the Receiver and FDIC-C (Indemnification lawsuit - PDF) and submitted over 100 notices of potential indemnity claims. (Notices can be found at Group 1: JPMorgan Chase Notices relating to Washington Mutual Whole Bank P&A - PDF in the Freedom of Information Act (FOIA) Service Center Reading Room and, JPMorgan Chase Notices relating to Washington Mutual Bank Whole Bank P&A at, Group 2: JPMorgan Chase Notices relating to Washington Mutual Whole Bank P&A).
On August 19, 2016, the FDIC Board of Directors approved a settlement among the Receiver, FDIC-C, DBNTC, and JPMC, to settle the lawsuit filed by DBNTC, the Indemnification lawsuit filed by JPMC and all claims for indemnification made by JPMC against the Receiver, including two other lawsuits disputing JPMC’s responsibility for tax liabilities of the failed WAMU (“DBNTC-JPMC-FDIC Settlement”). Under its terms, the DBNTC-JPMC-FDIC Settlement became effective only if DBNTC obtained court approval of the settlement. On June 30, 2017, the Superior Court of Orange County, California entered an order approving the settlement, and that order became final and unappealable on September 5, 2017. Under the settlement agreement, in exchange for releases from JPMC and DBNTC, the Receiver paid JPMC $645 million and issued DBNTC an allowed unsecured receivership claim of $3 billion on September 8, 2017. The DBNTC-JPMC-FDIC Settlement agreement can be found at the following link: DBNTC-JPMC-FDIC Settlement agreement - PDF.
As a result of the settlement, the parties dismissed certain lawsuits pending in the district court and an appeal pending in the court of appeals. These lawsuits had been stayed while DBNTC obtained approval of the settlement by the California state court.
Interim Dividend Distribution
As of June 30, 2017, the Receiver had approximately $2.76 billion to distribute to holders of claims allowed by the receivership, according to the priorities established in 12 U.S.C. § 1821(d)(11)(A). After paying JPMC in full, the Receiver made an interim dividend distribution on September 26, 2017, on all approved senior unsecured claims of the receivership, including the claims of DBNTC, general trade creditors, and the WAMU senior bondholders. This distribution represented approximately 95% of the receivership’s remaining total current assets. The allowed senior unsecured creditors shared equally (on a pro rata basis) in this distribution.
As of December 31, 2017, the receivership’s total assets increased from the prior quarter ending September 30, 2017 by approximately $19 million. This amount included an upward adjustment of $15.5 million attributable to investment interest earned by the Receiver on its cash held in the National Liquidation Fund (NLF). This adjustment was made to reflect WAMU’s reallocated pro rata share of the total investment earnings of the NLF as calculated on a daily basis from the receivership’s inception. For current financial information, please refer to the WAMU Quarterly Receivership Balance Sheet Summary.
The DBNTC-JPMC-FDIC Settlement did not resolve certain claims by the Receiver against JPMC, including the Receiver’s claims against JPMC relating to its alleged participation with other banks in manipulating certain benchmark rates and markets. It also preserved all claims of the Receiver against other persons who caused losses to WAMU prior to its failure, including claims relating to restitution orders and all regulatory and supervisory claims of FDIC-C. The Receiver anticipates that it will make a final distribution at a later date, however, consistent with the depositor preference scheme provided in 12 U.S.C. § 1821(d)(11)(A), it is unlikely that the Receiver will have funds to distribute to holders of receivership certificates issued to WAMU subordinate note holders or equity holders