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December 25th, 2009 admin Leave a comment Go to comments

It appears the law of unintended consequences has struck again in the form of new “behind the scenes bailout” program for the banks. I love it!!! Tha

Behind the Scenes Bailout

It appears the law of unintended consequences has struck again in the form of new “behind the scenes bailout” program for the banks. I love it!!! That’s sarcasm for those of you not familiar with my common sense morality and twisted sense of humor)

While main street squalors in the tide of recessions and debt the banking industry, fresh off of a tidy mortgage bailout is finding new and creative ways of accounting for its misgivings. This latest banking boondoggle expects to leave yet even more shareholders out in the cold. Can someone say ‘Class Action”? The hubris of these people never ceases to amaze…………

P.C.

From HousingWire:

WaMu Makes JPMorgan $29 Billion as Shareholders Rail

By JACOB GAFFNEY
May 26, 2009 9:23 AM CST

Reports this morning are speculating that new accounting rules will allow JPMorgan Chase & Co. (JPM: 36.44 -0.27%) to gain an additional $29bn over the life of certain Washington Mutual loans, as shareholders in the seized bank are joining forces to criticize the handling of the entire affair.

JPMorgan purchased WaMu assets when federal regulators seized the bank back in September.

Now, new rules allow for fair value accounting to determine the worth of underlying collateral, though it is unclear at this point what type of assets are involved in these loans. Previously, JPMorgan would need to declare the value of those assets according to its value in the market. Considering the troubled nature of financials, the latter method is arguably more volatile.

Using the former method, however, JPMorgan is able to mark down $118.2bn of assets by 25% equally and, as of yet, unrecorded $29.1m in pretax income over the life of the loan, according to Bloomberg.

This morning, WaMu shareholders put out a joint statement declaring a rising concern on the way the feds are handling the seized bank.

According to the text, they feel the regulators are setting dangerous precedents that will adversely affect the banking sector in the foreseeable future and these actions not just affect individual shareholders, but the financial sector in general.

“The FDIC’s fire-sale of Washington Mutual assets to JPMorgan changed the game for potential buyers of banks,” says the statement. “The new rule seems to be: Get regulators to place the bank into receivership in order to buy the assets at a fire-sale price.”

The shareholders justify their stance by saying the same mishandling is happening in Florida, at BankUnited Financial Corp. (BKUNA: 0.4922 0.00%): “Bidders for BankUnited Financial Corp waited on the side lines, hoping for the new form of behind the scenes bailout being offered by the FDIC–assets on the cheap. This has the potential to leave bondholders and shareholders out in the cold, just as was done with Washington Mutual Bank.”

A shareholder at BankUnited told HousingWire that he “criticized the FDIC and the new appointed members of the board of directors,” at a meeting discussing the takeover of the bank.

“Why couldn’t the board look after the interest of the shareholders?” he asks. “They have an obligation and a fiduciary duty to look after the interest of the shareholders and they simply failed to do so.”

“We feel that the FDIC should give a small bone to the shareholders and avoid a future lawsuit, something very similar what happened to the takeover of Wachovia Bank with Wells Fargo Bank,” he adds. “Unfortunately this did not happen and I am afraid that there will be lawsuits forthcoming.”

About the Author

Peter is the nation's leading authority on foreclosure prevention, attorney performed loan modification and loss mitigation strategies. His firm The Loan Modification Network connects homeowners with a team of specialsts in all fifty states to assist homeowners in foreclosure prevention solutions and loan modifications. Call1-877-840-MODS (6637) or go to http://www.us-loan-modification.com to learn more.

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Struck Very