The abrupt switch by Weil from being our friend to being our adversary had to have happened for a reason. I think there was more than just greedy bondholders behind the change in strategy. In January they were going after JPM and the FDIC but that stopped suddenly and they became buddies putting together the POS POR that basically gave away billions in exchange for paying off the bondholders and gifting them the shell company with the tax benefits and giving the BOD immunity from lawsuits.
I think the sudden switch was a result of some strong arm tactics on behalf of the Government who sees the economic health of JPM and the FDIC as vital to our country’s economic system. JPM needs the 4 billion just to remain strong. Paying WAMU a fair settlement was just too dangerous to the nations economy to be allowed to happen. Somehow the word was sent out to Weil that they could get a settlement from the tax refunds that would be large enough to pay off the bondholders but that the 4 Billion would have to stay with JPM. They could shuffle money around to make it look like JPM was returning the money but that would be replaced by tax refund money so in the end JPM would be better off than when they started. In return the Feds would promise not to prosecute the BOD for fraud (as was revealed in the congressional hearings) and the bondholders would be able to benefit from tax losses that would stay with the reorganized company.
The screwing over of equity was no big deal because that “always” happens in bankruptcy cases. The monkey wrench to the plan was our friend Joyce and her belief in the need for an EC and the fact that we had a UST who was honorable. Weil embarked on his equity has no value crusade and succeeded in driving down the share price and has lowered expectations to the point where most equity holders would now be willing to settle for a reduced amount.
I am still waiting to see where this is going. The EC and Susman are disrupting the plan. This may lead to a change of strategy on the part of Weil where we see something for equity in a revised POR. If that happens, then we will be left with a choice of accepting something that is less than fair but getting paid something quickly, or fighting on for more money but with a delay that could last years.
