Events to the Seizure

Texas Action

The claims of impropriety arise primarily from the Texas Action, which was brought by several insurance companies holding WMI common stock and WMI and WMB bonds. The suit alleges that JPM “...misused confidential financial information of WMI and WMB...” and in so doing, committed “Tortious Interference with an Existing Contract, Unjust Enrichment and Breach of Contract”. JPM allegedly placed JPM personnel at WMI, engaged in sham negotiations with WMI, and violated a confidentiality agreement with WMI by disclosing information to third parties to affect WMI’s stock price and credit ratings and induce government regulators to seize WMB [Texas Action].
The members of the Texas Action that had claims based on the ownership of WMI bonds and WMI equity have withdrawn their claims from the Texas Action. The parties in the case now consist solely of WMB bondholders [10]. The withdrawl was made in response to discussions with WMI counsel.

Rule 2004 Examinations

Discovery of JPM was granted on 6/24/09 to investigate the alleged misconduct of JPM prior to the seizure and sale of WMB and interference with the potential sale of WaMu [2004 Opinion].
The original discovery produced material that prompted WMI to file an expanded 2004 discovery motion on 12/14/09 for the examination of other knowledgeable parties. “To the extent the Requested Examination demonstrates that the Debtors have viable claims against JPMC, such claims are assets of the Debtors’ chapter 11 bankruptcy estates...” WMI is seeking information from “regulatory entities, rating agencies, former WaMu suitors, banks, and professionals...” [Expanded 2004 Motion].
Judge Walrath denied the motion for expanded 2004 discovery. The requests were overly broad, the information could be obtained through other channels, WMI already possess enough information to decide on further action, and the discovery would potentially circumvent rules of discovery in the DC case. She will entertain expanded discovery in the future if warranted. [1/28 hearing audio]

Justification for the Seizure

OTS cited insufficient liquidity as the reason for the seizure and referenced the September deposit outflow of 16.7 billion as dictating the timing of the OTS action.
OTS statements
“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.”
[9]
The characterization that WMB was lacking liquidity has been directly refuted by WMB personnel
Liquidity Statement
“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.”
[5]
Furthermore, WMB was “well-capitalized” according to the OTS and had access to sufficient credit from the Federal Reserve and Federal Home Loan Banks. [9,5]
The evidence suggests that the government seized a liquid, well-capitalized institution.

JPM Efforts Regarding WMI during 2008

For the time being, please refer to the articles listed below by Kirsten Grind. [4,5,6,7]

Regulatory / Regulator Issues Surrounding WMI during 2008
For the time being, please refer to the articles listed below by Kirsten Grind. [4,5,6,7]

References

KCCLLC Doc 1997, p435: The Texas Action
KCCLLC Doc 1219, Opinion on 2004 Discovery
KCCLLC Doc 1997: Expanded 2004 Discovery Motion
Kirsten Grind: "A Giant Downfall"
Kirsten Grind: "Why Did They Close WaMu?"
Kirsten Grind: "Did Inside Info Drive WaMu into Morgan's Arms?"
Kirsten Grind: "What a Deal"
1/28 Hearing Audio
OTS Fact Sheet
Notice of Dismissal of Claims