Written by Biloxi
Wells Fargo made an 11th hour pitch to Federal Deposit Insurance Corporation [FDIC] Chairman Sheila Bair to buy Washington Mutual if the bank went down. Washington Mutual was sold to JP Morgan Chase in 2008. Wells Fargo Chairman Richard Kovacevich proposed to Ms. Bair that Wells Fargo could acquire $50 billion to $100 billion in assets if the FDIC would allow for a 60 day review period. Wells Fargo have had talks with FDIC in their pursuit in Washington Mutual purchase. Read Mr. Kovacevich's letter. Click here.
Citigroup, too, wanted to purchase a Washington Mutual. Unfortunately, FDIC didn't pursue either Citigroup or Wells Fargo. In fact, on the evening of September 24, 2008, FDIC Chair Sheila Bair sent an congratulatory email to JP Morgan Chase CEO Jamie Dimon informing him that his company won the purchase of Washington Mutual. And according to Ms. Bair's email, this is clear evidence that the Washington Mutual purchase was not fairly bidded. From Wall Street Journal:
The structure proposed by Wells Fargo had not been offered or discussed with other banks and it was too late in the process to offer a similar opportunity to additional bidders, according to the person familiar with the matter. Bids were due the evening of Sept. 24, 2008.
Bair notified J.P. Morgan CEO James Dimon via email at 8:23 p.m. that he was the winner, according to another document unearthed by the examiner and recently made public.
“You are the high bid,” she wrote in the Sept. 24, 2008, message, according to the document. The subject line of the e-mail read “Congrats.”
Regulators did speed up the action, taking WaMu down on Thursday, Sept. 25. J.P. Morgan assumed all deposits and most assets for $1.88 billion, saving any costs to the FDIC’s insurance fund.
Mr. Dimon certainly became the winner since he was the only winning bidder who brought Washington Mutual at a dirt cheap price. No wonder Mr. Dimon said he could have gotten Washington Mutual for $1:
“One of the dark, dirty secrets is there were no other bidders on the bank,” said Dimon, reflecting on information that has been revealed through public records. “So we could have gotten it for $1.”
The question should be asked: Didn’t Ms. Bair call JP Morgan Chase days before already talking about potential Wamu seizure? Well, according Wall Street Journal:
On Sept. 16, Bair phoned J.P. Morgan boss Jamie Dimon to discuss the possibility of the bank buying WaMu’s assets out of receivership without government assistance. It was a turbulent week. Lehman had tipped into bankruptcy. AIG had been given a massive government infusion to keep it from imploding. WaMu, with questions swirling about its financial condition, was accelerating efforts to find a buyer.
But, I found this nugget. Look like JP Morgan Chase knew they were buying Washington Mutual. According to email on September 12, 2008, Rob Blackwell, writer at American Banker,, called JP Morgan Chase out on September 12th, 2008 that they are buying Washington Mutual. Chase responeds internally acknowledging that "Banker [meaning American Banker] has it [ meaning the story/scoop/info]". The response back was redacted. Judge for yourself. Click here.
The backroom deal between FDIC and JPMorgan CEO certainly speaks volumes in the name of fair bidding on failed banks. Yet, on the brighter side, Wells Fargo and Citigroup should thank Sheila Bair for not choosing neither one of them in the Washington Mutual purchase because the inheritance of Washington Mutual and their toxic mortgages has become Mr. Dimon's albatross on his back. It gives the old saying 'be careful what you wish for because you might get' a true meaning.
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