2008 Time Line

The following outlines the events of the financial crisis of 2008 -- with an emphasis on alleged JPM actions related to WMB. In JPM materials, "West" refers to Washington Mutual Bank.

January

February

March

11th: JPM enters into confidentiality agreement with WMI that prohibits disclosure of WaMu information to third parties and specifies that JPM will not purchase WMB or assets of WMB from any entity other than WMI.
16th: JPMorgan purchases Bear Stearns [20]
28th: JPM meets with regulators to discuss “Project West timetable” [BK 1997]
31st: JPM submits bid to purchase WMI. "JPM offered up to $8 per share for WaMu, with the final price depending on how [WaMu's] loans performed." [26]

April

4th: Gregg Gunselman (JPM) email: “We are preparing materials to present to rating agencies for the Madison and West transactions.” “We need input as soon as it is available, as it will have a direct impact on how we view the West deal.” [BK 1997, p 713]

May

June

4th:
Jose Cerezo (JPM) email discussing meeting between JPM CEO Jamie Dimon and Banco Santander chairman Emilio Botin.
"Emilio Botin and Juan asked many questions about specific opportunities. Wamu,..." "...Jamie reckoned that these are opportunities in which JP Morgan would also be interested. It is important to have an open dialogue with them, as Santander would not pursue any one of these opportunities if JP Morgan were to do the same (can't compete on price with JP Morgan for an acquisition in the USA). But Santander would probably hire JP Morgan as advisor it we are not going after them." "Asked why did JP Morgan not buy Wamu and instead TPG injected the capital; Jamie replied he thinks the potential losses are higher than TPG is estimating...."
[BK 1997, page 430]

July

11th: Indymac closed by OTS [1]
mid-July to August: WMB successfully weathers a 9.4 billion run [28]
17th: JPM:
- “...we may get more color tomorrow with the regulators - ...” regarding WaMu portfolio [BK 1997, p 580]
- “Analysis of West capital strategy” [BK 1997, p 583]
- “Option #3 Regulatory relief ... Have discussed with Fed on prior occasions” [BK 1997], p 585]
21st: SEC bans “naked” short selling in certain financial stocks. Washington Mutual is not included on the list [2,3].
WMI-CEO Kerry Killinger asks Hank Paulson to add WMI to the SEC list of institutions protected from naked shorting. Paulson allegedly refuses to intervene [26].
Hank Paulson allegedly tells WMI-CEO Kerry Killinger "You should have sold to JPMorgan Chase in the spring, and you should do so now. Things could get a lot more difficult for you." [26].
FDIC begins asserting pressure on OTS to seize WMB. OTS is apparently reluctant to downgrade WMB [BK 1997, page 448].
30th: Kerry Killinger meets with Reich (OTS) and Bair (FDIC) regarding WMB’s CAMELS score. FDIC seeks to have OTS decrease the score. [29]

August

3rd: JPM presentation:
- “Accounting for an acquisition of a business – resulting in a negative goodwill situation”[BK 1997, page 603]
- “Park acquires West lead thrift subsidiary (WMB) from Receiver” [BK 1997, page 618].
- “REIT preferred securities ($3.9bn) are extinguished as they are assumed to become liabilities of the holding company upon receivership or bankruptcy, increasing net asset value of lead thrift bank"” [BK 1997, page 618].
10th: Project Madison/West rating agency presentation [BK 1997, page 714]
End of August: WaMu executives meet with Moody’s to discuss the overall health of the bank [28].

September

~4th:
WSJ Deal Journal article on JPM-FDIC discussion
"Three weeks before J.P. Morgan bought WaMu’s deposits for $1.9 billion, officials at the Federal Deposit Insurance Corporation had called J.P. Morgan to say that 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..."
[27]
7th:
- Fannie Mae and Freddie Mac placed into conservatorship [13].
- WMI enters into memorandum of understanding (MOA) with OTS. Contains “an updated, multi-year business plan and forecast for its earnings, assets quality, capital and business segment performance.” The MOA "did not require the company to raise capital, increase liquidity..." [BK 1997, p 449]
- Alan Fishman replaces Kerry Killinger as CEO [28]
11th:
- JPM email: “-acquire assets and liabilities of West’s thrift subsidiaries but leave behind senior and unsecured debt with the FDIC ($15.2bn)” [BK 1997, p 646]
- JPM executives meet with Paulson and Bair (FDIC) in separate meetings in DC. The details of the meeting are unknown [30]
- Moody’s downgrades WaMu [28]
- Last liquidity report from WaMu
  details
  “The last liquidity report from inside WaMu shows that on September 11 the bank could borrow $6.2 billion from the Federal Home Loan Banks in Seattle and San Francisco. It could borrow an additional $8.2 billion from the Federal Reserve Bank, a line that it hadn’t accessed at the time of its seizure, according to two people familiar with the matter.”
  [29]
11th - 14th: Customers withdraw 2.3 billion [28]
~12th: WMI hires Goldman Sachs “to help find a buyer for Washington Mutual” [BK 1997 p 449].
12th:
- JPM allegedly freezes assets of Lehman Brothers [BK 1997, p 489].
- Bloomberg reports that JPM is in advance talks to buy WMI [BK 1997, p 449].
13th - 14th:
- Meeting of financial executives, Federal Reserve and Treasury officials meet with executives of several top financial firms [11].
- Federal Reserve and Treasury officials conclude that “Lehman Brothers was probably insolvent.”[16].
14th: JPM presentation:
- “Park acquires assets and liabilities (as detailed below) of West’s thrift subsidiaries from Receiver"
  “Park will issue to Receiver a Contingent Preferred Security (CPS) linked to West loan loss performance with a par amount equal to the par value of the thrift senior and subordinated debt ($14.1bn).” [BK 1997, p 649]
- “Adjusted tangible book value (NAV) $8,166"
  “Preliminary goodwill created (negative goodwill) ($11,181)" [BK 1997, p 668]
Mid September: FDIC directs Fishman to find a buyer for WaMu by 9/30 [28]
15th:
- OTS cites as the beginning of 16.7 billion in outflows from WMB [8]
- Lehman Brothers Holdings Inc. files for bankruptcy [10]
- Bank of America acquires Merrill Lynch after failed negotiations to buy Lehman Brothers due to Federal Reserve and Treasury making “it clear that the federal government would not assist any buyers of Lehman Brothers.”[14,16].
- Reserve Primary Fund money market mutual fund is hit with “a wave of redemptions” due to Lehman exposure [12].
- Alleged JPM statement: “We were watching money 'fly out of the bank,' from a 'war room' at JPMorgan’s New York headquarters, said one JPMorgan executive, according to these people.”[30]
Between 15th - 18th: Freddie Mac and several Federal Home Loan Banks request to have their P&I bank accounts moved to JPMorgan Chase by 9/26 [25].
16th:
- Federal Reserve lends AIG 85 billion [15].
- Reserve Primary Fund “breaks the buck” [12,18].
- Customers withdraw 2.4 billion [28]
- Alan Fishman meets with Bair "to update her on efforts to find a private buyer". Bair allegedly states that WMB will be placed on troubled bank list if not sold by the end of September. Bair further allegedly states "that the FDIC had been approached by at least one financial institution interested in buying WaMu from the government as a distressed asset, according to WaMu executives.”[28, 30]
17th:
- SEC bans “naked” short selling of all stocks [4].
- “For the week ending on Wednesday September 17, 2008, investors reportedly redeemed $145 billion from their money market mutual funds.” [16].
- Investors begin to shift from money market funds backed by commercial loans to funds backed by treasuries and other government bonds, creating liquidity problems for institutions that deal with commercial paper and increasing overnight borrowing costs [19].
- Bernanke reports that “[t]he resulting outflows threatened the stability of short-term funding markets, particularly the commercial paper market, upon which corporations rely heavily for their short-term borrowing needs.” [7].
- TPG waives the price reset payments in their investment contract with WMI [33]
18th:
- SEC bans short selling of 799 financial companies, including Washington Mutual [5].
- Talks begin in Washington on a financial bailout plan [16].
- Institutional money managers reportedly seek to “redeem another $500 billion” from money market funds, but only redeem 105 billion after Secretary Paulson intervenes [16].
- Bernanke and Paulson begin discussing proposal for 700 billion bailout plan with congressional leaders [16].
- Gary Welsh (PWC) email: “On larger institutions, the FDIC has typically used a Bridge Bank option which is essentially a P&A in which the FDIC acts as a temporary acquiror. This option is not available for thrifts, which must be put in Conservatorship instead – e.g., IndyMac. Closing and selling the Bridge Bank or a Bank in conservatorship allows the FDIC more time to market the institution. More recently, when Bridge Banks have been sold there has been an FDIC loss-sharing arrangement on the bad assets.”[BK 1997, p 814]
- Customers withdraw 2.8 billion [28]
- Report that both JPM and Citigroup are not participating in Goldman Sachs auction of WaMu [32]
19th:
- The Treasury announces a program to guarantee 1.00/share price of participating money market funds [17].
- JPM: “Had spoken to FDIC about Bank only in receivership with protection”
  “Contacted by FDIC about interest in West”
  FDIC: “Want a solution by Friday, September 26" [BK 1997, p 518]
- “They [FDIC] met with West [WMB] – had to open books”
  “In process of updating due diligence”
  “Updated loss forecast and loan valuations” [BK 1997, p 523]
- JPM: “Issues and considerations ... Willingness of someone else to buy West holding company or West bank (at better terms)” [BK 1997, p 537]
20th: President Bush requests 700 billion bailout plan.
22nd:
- Dan Cooney (JPM) email to James Wigand (FDIC):
  “Jim – one point of clarification: the person denying us the information was not their investment banker but an internal WaMu corporate development person.”
  “Jim – Sorry to bother you but we have asked the target for the following information and have been advised by their investment bankers that they will not provide any further information unless Charlie Scharf calls Alan Fishman and personally explains why it is necessary. This process seems counterproductive to an efficient resolution of this situation and we were wondering if there were anything the FDIC could do to expedite this request.”
  “Specifically, we have asked for the following information: ‘What is the deferred tax asset at the Bank and Holdco level as of Aug 31, 2008 and what is it projected to be at the end of September.”
  “This request is a focused one and one which we need to help us properly allocate value between the bank and the holding company.” [BK 1997, p 692]
- James Wigand (FDIC) email to Dan Cooney (JPM)
  “We will try to get the information. Let me know if you have any more data room access problems.” [BK 1997, p 692]
- Ryan McInerney (JPM) email: “Sean has been charged by Charlie, etc with building the Rating Agency deck.” [BK 1997, p 725]
- Sean Carmody (JPM) email: “Can someone on your team send us the book that you used to discuss West w/ the FDIC? Charlie and Mike would like us to leverage the page from that book that laid out West’s loan portfolios, by product, on a managed basis for the rating agency meetings which are scheduled to begin tomorrow.” [BK 1997, p 731]
- Meeting at JPMorgan headquarters involving JPM executives, including Dimon, regulators, and Rodgin Cohen of Simpson Thacher representing WaMu. "...the regulators decided to run a dual-track process, and told JPMorgan Chase they were advising potential bidders to consider different options, from buying everything to buying just the deposits and mortgage portfolio." [24, p 293 - 4]
- Chad Borton email: “If you did not catch this morning, see article from Chuck below...leak of potential FDIC.” [BK 1997, p 760]
- The bank run reportedly slows. [29]
23rd:
- Bid process for WMB opened to select financial institutions [BK 1997, p453, p689].
- “TD still in West process. Any of you think they post.” [BK 1997].
24th:
- Citigroup submits an indicative, non-conforming bid for Washington Mutual.
- JPM submits bid at 6:30 pm [24, p 293 - 4].
- Dimon reportedly calls Scharf around 8:30 pm to report that the FDIC has accepted JPM's bid for WaMu and that "The plan, he explained, was for the FDIC to seize WaMu after the close of business on Thursday, and immediately sell the deposit and loan portfolios to JPMorgan Chase." [24, p 293 - 4]
- FDIC Memorandum Authorizing sale to JPM:
  --“Uninsured Deposits: $8,452,029,625 (as of September 17, 2008)”
  --“Tier 1 Leverage/Tier 1 Risk Based/Total Risk Based: 7.07%/8.4%/12/44% (June 30, 2008)”
  --Cost test summary redacted
  --“...DRR is requesting a waiver by the Board of the restriction on application of the Robinson Resolution (Third) to institutions with assets less than $1 billion...”[BK 1997, p 695, p 701, p 706]
25th:
- Wall Street Journal reports that WaMu is in talks with private equity firms Carlyle Group and Blackstone Group. [34]
- Sheila Bair calls Paulson "around 11:00 am to break the news that the FDIC was going to seize the bank, and that JPMorgan would pay the government $1.9 billion for the company, which had $301 billion in assets." [On the Brink, p 292 - 3].
- WMB liquidity as reported by a senior WaMu manager and a WaMu executive
  details
  “On the day regulators shut WaMu, the bank had $29 billion in net liquidity—about 9.4 percent of assets, and nearly twice the closure threshold.”
  [29]
- WMB capital ratio -- OTS Fact Sheet
  details
  “WMB met the well-capitalized standards through the date of receivership”
  [31]
- WMB closed by the OTS and placed into FDIC receivership.
  OTS justification
  “With insufficient liquidity to meet its obligations, WMB was in an
  unsafe and unsound condition to transact business.”
  “Since July 2008, the pressure on WMB increased as market
  conditions continued to worsen. Significant deposit outflows began on September
  15, 2008. During the next eight business days, WMB deposit outflows totaled $16.7
  billion, shortening the time available to augment capital, improve liquidity, or find an
  equity partner. Given the Bank’s limited sources of funds and significant deposit
  outflows, it was highly likely to be unable to pay its obligations and meet its
  operating liquidity needs.”
26th:
- Legislators fail to reach a deal on the 700 billion bailout plan.
- WMI and WMI Investment file for Chapter 11 bankruptcy protection in Delaware.
28th: Tentative deal announced on the 700 billion bailout plan
29th:
- Bailout vote fails in the House
- Citi agrees to purchase assets of Wachovia in an FDIC-backed deal

October

1st: Senate passes 700 billion bailout package
3rd:
- House passes bailout plan, which is signed by President Bush
- Wells Fargo buys Wachovia.
10th: FDIC officially approves insurance limit increase to 250,000 included in bailout plan [19].

November

December

References: