In one of the first lawsuits to dispute the Federal Deposit Insurance Corp's authority over seized banking assets, Washington Mutual Inc (WMI) has sued the federal agency for considerably more than $13 billion with regard to the loss of its banking operations.
The lawsuit, which could apparently have significant implications for other big, troubled banks, was filed late Friday in US District Court for the District of Columbia. WMI alleged that the agency has inappropriately deprived the failed US savings and loan of potentially billions of dollars in claims against its earlier banking unit.
WMI has also stated that the FDIC had improperly sold its banking assets to JPMorgan Chase for an unreasonably low $1.9 billion, instead of conducting a "straight liquidation" - a move that could have resulted in more money for creditors, including the holding company.
Furthermore, in its complaint, WMI asking for a recovery of as much as $6.5 billion of capital contributions that it is supposed to have made to its banking unit from December 2007 till September 2008, when it was seized by the regulators.
Requesting a jury trial, Washington Mutual is seeking $177.1 million damages related to unpaid loans made to the banking unit, along with the return of $4 billion of trust preferred securities, and $3 billion of tax refunds.
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The stock is still trading
There are a lot of people who have been following along with the plight of the parent company since September and trading the stocks associated with Wamu in Bankruptcy. To them, this comes as no surprise. There are four principle stocks. Wamuq, the common stock now trades at about a nickle a share.
And there are three preferred issues,
Wamkq trading at about $.15, (par $25)
Wampq trading at about $4.50 (par $1000.00)
Wahuq trading at about $4.50 (Par $50)
The preferred stocks have Liquidation preference, and that means that if the company is liquidated, they will have to satisfy the preferred shares at par before they pay common share holders. Of the two stocks trading around five dollars one has a higher price because of it's par value and the other because it is seen to be farther forward in the order of preference.
If Wamu wins back five or ten billion, the first five billion (above Debt) or so will go to the preferred stock holders.
But there are many things that can happen in a re-organization of the company. The stock is trading and it is tradeable. But no one would really call it investible. There are people who bought the preferred shares last September at a penny a share who are very happy at this news.