Group Assignment-1

Group: 8
Team Members: Venkata, Aakash, Mounika, Gayatri, Prashanth
Wall Street Journal (WSJ) Assignment on Overview
Introduction:
J.P. Morgan Chase & Co. is an American multinational banking and financial services holding
company which is also the largest bank in the United States. Washington Mutual Inc. (WaMu)
was a savings bank holding company and the former owner of Washington Mutual Bank, the
United States' largest savings and loan association bank. During its collapse in 2008, Office of
Thrift Supervision (OTS) seized Washington Mutual Bank from Washington Mutual Inc. and
placed it in receivership with the Federal Deposit Insurance Corporation (FDIC). The FDIC sold
the banking subsidiaries to J.P. Morgan Chase and from then all WaMu branches were renamed
as Chase branches by the end of 2009. Washington Mutual bank being the sixth largest bank in
the United States, its closure and receivership is considered as the largest bank failure in
American financial history.
Problem Analysis:
The problem stated in the article is regarding a legal battle between J.P. Morgan Chase & Co. and
FDIC who fought for years on the issue who is ultimately liable for claims that arouse from the
failed Washington Mutual bank. The bank has said the FDIC receivership that liquidated
Washington Mutual in 2008 should pay all the claims. FDIC has countered that J.P. Morgan
Chase who bought the business for $1.88 billion and handled the financial crisis is responsible
for all the claims. On the other hand, J.P. Morgan has worked to settle a wide variety of mortgage
related litigations and in the year 2013, it also paid a $13 billion penalty to the justice department
related to second mortgages.

Group Assignment-1

Deutsche Bank, which acts as a trustee for securitized pools of more than a half million home
loans sued both the FDIC and J.P. Morgan in the year 2009 stating that, either the FDIC or J.P.
Morgan should be held responsibility for losses in WaMus fraudulent closure or poorly
underwritten home loans. J.P. Morgan, who bought WaMus banking operations said that it left
behind the liabilities during its takeover but according to the FDICs version, J.P. Morgan took
on the liabilities attached to the mortgage loan-securitization trusts when it bought the WaMu
operations.
According to market analysts, J.P. Morgan is responsible only for liabilities reflected in the book
value on WaMus financial accounting records as of September 2008. Since the Deutsche lawsuit
was filed after the September 2008 failure of WaMu, the FDIC receivership itself is responsible
for the liabilities, but not J.P. Morgan. The FDIC had also argued that book value could include
more than what was on the accounting records as of September 2008. On the other hand, J.P.
Morgan has other liabilities also including those related to Washington Mutual Mortgage
Securities Corp., and hence the dispute went to bankruptcy court.
Conclusion:
The dispute is not just about handling the liabilities of the bank, but it is a part of broader battle
over what exactly J.P. Morgan bought when it acquired the business during downfall of the
world-wide financial system as markets seized up on the brink of collapse in the September
2008. Finally, J.P. Morgan won the legal battle in its efforts to avoid billions of dollars in
potential liabilities from WaMu purchase.
Nice summary! However, please note that an ethical issue is a problem or situation
that requires a person or organization to choose between alternatives that must be
evaluated as right (ethical) or wrong (unethical). You havent clearly stated what the
ethical issue is. (-15)

Group Assignment-1

2. The article was printed in the MARKETS section of the WSJ with the title J.P. Morgan
Wins Legal Battle in WaMu Case.