OBAMA VS JPM
The revelation by Wall Street Journal on Sunday that fdic was in disagreement with wmi and jpm on the proposed POR is significant in several ways.
1.The so-called “global understanding” or “global settlement agreement” was a tactic used by the debtor, jpm and fdic to delay the much expected SJ ruling by the Judge Walwrath. By not singing on the March 26th POR and revelation of its disagreement to the media, fdic eventually killed the current form of “global settlement agreement”. Without such a “global settlement agreement” in place, I hope THJMW can expedite the long waited SJ ruling.
2.The disagreement by fdic was on the basis that no TARP recipient can receive tax refund. Therefore, by law, jpm is not allowed to receive a portion of tax refunds from wmi’s tax refund receipts as specified in the March 12th agreement and the March 26th POR. I am sure this will be one of the EC’s arguments too against distributing the debtor’s tax refund into jpm’s pocket. Stopping jpm from taking wmi’s tax refund dollars will strengthen the entry of assets on the debtor’s balance sheet. It’s all good for the shareholders.
3.Here comes a big picture. As I said on Sunday morning (see my post “The Critical Showdown” ), “It is … interesting to note fdic didn’t sign off the proposed POR yet. It’s possible that fdic is afraid that once it signs off the current plan, it in fact indirectly admits it seized a likely solvent bank with abundance of cash on hand ... It will certainly draw fire from wamu bondholders, as well as face relentless lawsuits from WMI shareholders for fraudulent transfer and illegal seizure of a solvent bank. The proposed POR is a gift to jpm and wmi creditors, unjust to shareholders, and ironically poisonous to fdic. The fdic may start to realize it has been played by jpm all along … ” Under the same thread, I also wrote, “…fdic may realize this so called "global settlement plan" is not "global" at all. jpm gets paid and walks away free while fdic is left in the open facing angry lawsuits from wamu bondholders and wmi shareholders. The only way to have a global settlement is to have jpm to pay. How can that happen? Wait until the EC sorts out the asset valuation and takes control the process. It then can pursue litigation against jpm relentlessly until it pays.”
I shall confess when I wrote above words, I had no answer to Mr. twbopfan’s question “The problem is FDIC has no way to force JPM to pay. FDIC was tricked by JPM, and could not find a way to legally force JPM to pay. JPM is a snake.” After reading the WSJ article, however, I now think if fdic intends to do it, it has full leverage to force jpm to pay. It can simply turn around and face the Senate PSI or the Court, and say “we were misled by jpm into seizing a solvent bank.” It will be all over for jpm and its chief. Keep in mind, if the seizure was based on fraud information, the fdic,or maybe the Court should have the power to take away from jpm its prized theft. Such a threat, a threat with real consequence, will make jpm pay and pay dearly. This is the only way out for very concerned party to reach a true global settlement and end this mess.
