This was an eventful week for Washington Mutual, with two important things happening:
(1) Kerry Killengers interview with the Senate committee, where he defended WAMU's liquidity, and the fact that the FDIC acted pre-maturely in seizing the bank. Killenger stated the factual reasons for his position:
(a). TARP was released, and should have applied to the nations largest thrift, that is what TARP was for Gods sake, not investment banks
(b). The FDIC raised the limit of insured deposits to $250K
(c). WAMU was paying down its debt with the $2B in interest income, as well as cutting back on expenses. The progress was making real improvement in the bottom line and management saw no reason to sell the bank even before TARP, thus Killengers decline of DImon's $8 a share offer
(2) Senate showed that this investigation into mortgage banking was clearly focused on Washington Mutual. How convenient that this hearing is held at the same time an ongoing case in US Bankruptcy court is ongoing and gaining traction with the court already ruling against lying JPM regarding the $4B deposit which belongs to WMI.
(3) Bair defends her seizure, for obvious reasons and claims nothing else could have been done. This is an outright false statement considering the FDIC violated its confidentiality agreement with Washington Mutual by disclosing a seizure to JPM weeks before. This breach eliminated any reason for JPM to bid, and also opened up the opportunity to short the stock.
(4) The stocks that were part of the "clubby few," were extended special considerations like TARP funds and protection from short selling. Those that were not part of the "clubby few," got crushed, i.e. Lehman Brothers and Washington Mutual.
____________________________
The summarization of this weeks events clearly show the US Government, led by secretary Paulson, created a special club that intended to consolidate the banking sector and used the financial crisis as a tool to make it possible. The lawsuit brought on by WMI has exposed the truth of what really happened and the court will continue to award favorable rulings to Washington Mutual.
The corruption by private sector appointed politicians is already exposed, and JPM will loose this one in the end. Now that Kerry Killenger has emerged as a voice of not only the EC, but his legacy WM, good things will happen, and quickly in my opinion. The fact that GS was just brought up on corruption / ethical charges adds further fuel to the theory that Goldman may have hurt WM more than it helped it find a buyer. Killenger said in his testimony before the senate, he never trusted GS.
Its all out now, now all longs need to pound the concept of the club to the senate, and how we will never vote for the corrupt politicians who signed off on this.
