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Judge Rules JPMorgan Chase Is Not Responsible For WaMu’s Pre-September 2008 Liabilities

gavel-threeA federal judge has ruled that the Federal Deposit Insurance Corp., is liable for facing certain legal claims that FDIC-insured JPMorgan Chase inherited from its 2008 acquisition of Washington Mutual, according to media reports.

JPMorgan acquired the failing Seattle-based bank for $1.88 billion in 2008 during the onset of the financial crisis, after the Office of Thrift Supervision seized Washington Mutual and appointed the FDIC as receiver. With the ruling, Judge Rosemary Collyer in the U.S. District Court for the District of Columbia settled a long-standing dispute over who is liable for facing the claims – JPMorgan has contended that the FDIC should be responsible because of its receivership of Washington Mutual, and the FDIC has countered that JPMorgan should pick up the bill because of its acquisition of Washington Mutual.

The lawsuit that is central to the case was filed in 2009 by Deutsche Bank against both the FDIC and JPMorgan Chase for $10 billion, claiming that Washington Mutual misrepresented the quality of mortgage-backed securities it issued, causing massive losses for investors. The FDIC claimed that JPMorgan should be responsible for Washington Mutual's liabilities, which JPMorgan denied, according to reports.

Collyer ruled that the FDIC receivership is responsible for the Deutsche Bank lawsuit because it was filed after the FDIC seized Washington Mutual in September 2008. Collyer said that only liabilities that were on Washington Mutual's books as of September 25, 2008, were JPMorgan's responsibility.

"We are pleased with the judge's decision," said Jason Lobo, a spokesman for JPMorgan Chase. A spokesman from the FDIC told DS News that the Corporation does not comment on active litigation.

JPMorgan Chase has been penalized handily by the government for its mortgage servicing practices in the years since the crisis. In February 2012, the bank was one of five financial institutions to settle with the Department of Justice, 49 states, and the District of Columbia for $25 billion over alleged mortgage loan servicing violations and foreclosure abuses. In November 2013, JPMorgan agreed to a then-record $13 billion settlement with the DOJ for misrepresenting the quality of mortgage-backed securities to investors. Collyer's ruling does not affect either one of these penalties paid out by JPMorgan.

About Author: Brian Honea

Brian Honea's writing and editing career spans nearly two decades across many forms of media. He served as sports editor for two suburban newspaper chains in the DFW area and has freelanced for such publications as the Yahoo! Contributor Network, Dallas Home Improvement magazine, and the Dallas Morning News. He has written four non-fiction sports books, the latest of which, The Life of Coach Chuck Curtis, was published by the TCU Press in December 2014. A lifelong Texan, Brian received his master's degree from Amberton University in Garland.
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