The WSJ reports:
Three weeks before J.P. Morgan bought WaMu's deposits for $1.9 billion, officials at the Federal Deposit Insurance Corp. called J.P. Morgan to say the FDIC was carefully monitoring WaMu and that a seizure of its assets was likely. The FDIC said it would want to immediately auction off WaMu's assets if a seizure was necessary, people familiar with the situation told Deal Journal.
J.P. Morgan was well-prepared, then, when the FDIC asked for bids Tuesday, Sept. 23. On Wednesday night, the regulators told J.P. Morgan the bank had won the bidding, one person close to the situation said.
So, three weeks before WaMu was taken over the FDIC told JP Morgan that they were likely to seize the assets.
A week later the OTC agreed a deal with WaMu (resulting in the change of its CEO) that said
WaMu also announced that it has entered into a Memorandum of Understanding (MOU) with the Office of Thrift Supervision (OTS) concerning aspects of the bank’s operations, principally in several areas of its risk management and compliance functions, including its Bank Secrecy Act compliance program. In addition, WaMu has committed to provide the OTS an updated, multi-year business plan and forecast for its earnings, asset quality, capital and business segment performance. The business plan will not require the company to raise capital, increase liquidity or make changes to the products and services it provides to customers.
So WaMu was – according to WaMu’s press release – not required to raise capital, increase liquidity or make changes to the products and services it provides customers.
Now I am aware that the OTS is not the same organisation as the FDIC - but somewhere the government was talking out of both sides of its mouth - and what the FDIC told JPM made it more likely that WaMu would fail to raise capital or find a buyer.
I am renewing my call. Sack Sheila Bair for cause.