The most enormous bank failure in history, Washington Mutual Inc., may see life again after bankruptcy. “But how?” you ask. Its roughly $5.6 billion in tax refunds, currently stands as its largest asset—which is, thanks to a recently approved agreement, shared amongst JP Morgan Chase & Co., the Federal Deposit Insurance Corporation and WaMu itself.
Recently, WaMu filed for a reorganization plan to implement this agreement, yet, the FDIC has yet to sign on. The plan contains a rights offering to generate funds to support the company—which would reorganize based on an investment subsidiary and a mortgage reinsurer. There’s also a plan to sell shares.
The FDIC said recently, it “is working with all parties involved to reach agreement with respect to all terms of the proposed settlement.” The FDIC sold WaMu to JPMorgan for $1.9 billion after it was seized by regulators, nearly two years ago. According to critics, the company’s reorganization plans lack details on the rights offering. It fails to mention anything with regard to how it will raise from the share sales; and offers no analyses nor projected revalue.
Shareholders will probably object to the reorganization plan as they feel WaMu may have up to $20 billion in assets, to distribute to creditors. Yet, WaMU said it was distributing closer to $7 billion. The question remains, what will this all mean to the market? How is it possible failed banks can get a second chance of life while tax-paying citizens get red-tape and minimal, time-draining relief from foreclosure?