FBI is currently investigating Wamu management. If they are found guilty of corruption, by all means send them to jail. However, the key for this law suit is the reckless and illegal action by a government agency. If Sheila Bair can do this to Wamu and Wachovia, she will continue to do it to other banks.

Not that many people pay attention to FDIC and many are still under the false impression that Sheila Bair cares about taxpayers. We all understand investments in stocks, bonds, even mutual funds are risky, but NOBODY, I mean, ABSOLUTELY NOBODY has the right to show such contempt to our deposits and savings that we have earned from working hard all our lives.

I believe a government agency can only function effectively and efficiently if its leader is intelligent and fair. When the leader is corrupt, systemic risk with irreversible consequences is involved and poses a threat to the entire nation. For example, given the scope of the crime, it would be shocking to find only "little" inspectors are responsible for the illegal Indymac backdating and the lack of investigation on Madoff's scam.

I believe this agency has several decisions detrimental to the US financial market today and I want to explain why.

What is FDIC? "The Federal Deposit Insurance Corporation (FDIC) is an independent agency created by the Congress that maintains the stability and public confidence in the nation’s financial system by insuring deposits, examining and supervising financial institutions, and managing receiverships... The FDIC treats all employees, insured financial institutions, and other stakeholders with impartiality and mutual respect."

http://www.fdic.gov/about/mission/index.html

Im a Wamu shareholder so let's begin with this "biggest bank failure" in history. According to Sheila Bair, Wamu was facing intense liquidity pressure. OTS and FDIC decided to seize the bank and sell it to JP Morgan so deposits could be saved. In addition, this was done on a Thursday instead of the normal Friday because there was a press leak and Bair did not want to have a bank run.

But how did FDIC determine Wamu was in so much trouble that this seizure had to happen immediately? Wamu wasnt even on its problem bank list!

Besides, "Washington Mutual had a Tier 1 capital ratio of 8.4percent on Sept. 30, well above the 6 percent threshold that regulators use to classify a bank as well capitalized. JPMorgan Chase (NYSE: JPM), which purchased WaMu had a similar ratio of 8.9 percent. Wachovia... had a capital ratio of 7.5 percent as of Sept. 30, compared to Wells Fargo’s 8.6 percent. And National City had an 11 percent capitalratio, and yet had to sell out to PNC Financial Services (NYSE: PNC). By comparison, Bank of America (NYSE: BAC), considered one of the bedrock financial institutions, had a capital ratio at the end of the third quarter of 7.6 percent."

http://www.kciinvesting.com/articles/9864/1/Canadas-Big-Five-Banks-Compa...

In addition, "Washington Mutual, which already essentially 'went under' by nature of forced acquisition, has a tangible book/asset ratio of 3.66. And that number is on the higher end of the scale/list. So, the thinking would be that many of the institutions with ratios lower than that could potentially be in trouble as well.

The US banks & their tangible book/asset ratios:

BB&T (BBT) 6.86
PNC (PNC) 5.87
Northern Trust (NTRS) 5.51
Goldman Sachs (GS) 4.86
Morgan Stanley (MS) 4.35
JPMorgan (JPM) 3.83
Washington Mutual (WM) 3.66
---
Wells Fargo (WFC) 3.50
Merrill Lynch (MER) 2.84
Bank of America (BAC) 2.83
US Bancorp (USB) 2.74
Lehman Brothers (LEHMQ.PK) 2.39
Citigroup (C) 1.52"

http://seekingalpha.com/article/125071-a-look-at-banks-tangible-book-ass...

Most importantly, Washington Mutual Holding, Wamu's parent company, had over $4 billion in cash. Is that not enough to keep Wamu functional for a few more days as the bailout was being voted in Congress?

http://www.iht.com/articles/ap/2008/10/21/business/NA-US-Washington-Mutu...

We know Bear Stearns and Wachovia had approached the government for financial assistance but did Wamu? Without a doubt Wamu management was corrupt and made many poor and shady business decisions, contributing significantly to its downfall. As the mortgage crisis became more drastic, it engaged Goldman Sachs to shop for a buyer. Here was the strange thing, less than 2 weeks before FDIC seized Wamu Goldman actually upgraded Wamu; it "took the thrift off its "Americas Sell" list and said even though losses "continue to deliver body blows to the bank, the equity base is absorbing the pain.""

http://www.nypost.com/seven/09132008/business/now_wamu_has_breathing_roo...

The question was, could Wamu's books have deteriorated so much in just two weeks, or did Goldman miscalculate its recommendation?

Not only that, is FDIC immune to our law?

"F.D.I.C.’s October agreement with JPMorgan Chase and Washington Mutual allows Chase to pick and choose which of the city’s 148 Washington Mutual branches it will keep. Chase will then turn over the rejects to the F.D.I.C. But here’s the kicker: According to sources, the F.D.I.C. [CAN THEN SIMPLY TERMINATE THE LEASES OF THOSE REJECTED BRANCHES, ALL CONTRACTUAL OBLIGATIONS VOIDED]...

-I am Lanlord for on of the WAMU Location I don't know who to talk to about this Lease or how to pay my Mortgage.
SOMEONE PLEASE HELP ME
-I believe we spoke with each other. WaMu moved out as of 2/10/,leaving me with an empty building and half a million loan with Chase-WaMu. FDIC legalized the cherry pick by Chase without obligations.Jamie Dimon is really a very smart banker and good bzman,but at the price of all WaMu contractors, landlords,shareholders,etc.
-I got the same situtation. They stopped rent payment. I can not pay the mortgage and will lose the property."
http://www.observer.com/2008/real-estate/it-s-washmu-landlords-fear-gapi...

Things got even worse after this seizure because FDIC basically killed the bond market.

"Washington Mutual Inc. bondholders are likely to lose most of their money after the thrift was seized in the largest U.S. bank failure in history... It seems that WaMu's major debt holders have been stranded by regulatory intervention... The deal structure seems to be unprecedented in that it excludes bondholders at the holdco and bank levels from the major assets and liabilities of the operating bank.''"

http://www.bloomberg.com/apps/news?pid=20601087&refer=home&sid=aCpGk.NPYZ3g

Banks were now having an even harder time raising capital via this common method (selling bonds). Wachovia became the first casualty as a result of this repercussion.

"The first thing that happened this morning: credit-default swaps blew out on Wachovia... Wachovia bondholders are wondering if they're next," Sauter said. Translation: options on Wachovia bonds showed confidence in the securities had collapsed. "Wachovia is on the ropes now because their financing costs are going through the roof. It's an absolute reaction against how FDIC sold WaMu," Sauter said.""

http://www.philly.com/philly/blogs/inq-phillydeals/Did_FDIC_doom_Wachovi...

"At 4 a.m., Bair told Steel that the FDIC had chosen Citi to buy most of its operations, turning down a Wachovia proposal to stay independent with government help, according to the filing" Instead, "FDIC pushed both sides to make an announcement on Monday, Sept. 28, before the markets opened or Wachovia would be seized."

http://www.charlotteobserver.com/business/story/536848.html
http://www.nypost.com/seven/10072008/business/fingerpointing_amid_the_wr...

By the way, since when did blackmailing become legal?

WSJ reported this “sworn affidavit filed this weekend in federal court by Wachovia Corp. Chief Executive Robert K. Steel… “Wachovia was under tremendous pressure from Citi and the regulators to conclude a transaction with Citigroup with definitive agreements by the following Monday, October 6, 2008″… The Company’s advisors and I told the board that we believed that unless a definitive merger agreement was signed with either Citigroup or Wells Fargo by the end of the day Friday, October 3, that the FDIC was prepared to place Wachovia’s banking subsidiaries into receivership,” Mr. Steel said in the affidavit.”
http://online.wsj.com/article/SB122325890301006757.html

"Wachovia saw its share price plummet 90% to below 70¢ when Wall Street opened today. Federal regulators helped to arrange a deal in which Citigroup will take on $42 billion (£23 billion) of losses on a $312 billion pool of loans held by Wachovia, which has a portfolio of risky mortgages."

http://www.financemarkets.co.uk/2008/09/29/citigroup-in-wachovia-rescue-...

Here was another questionable act by Sheila Bair and her agency. How did FDIC determine Citigroup was strong enough to rescue Wachovia? This choice made no sense because Citigroup itself needed a huge bailout just a month later.

"Under the plan, Citigroup and the government have identified a pool of about $306 billion in troubled assets. Citigroup will absorb the first $29 billion in losses in that portfolio. After that, three government agencies -- the Treasury Department, the Federal Reserve and the Federal Deposit Insurance Corp. -- will take on any additional losses, though Citigroup could have to share a small portion of additional losses... In addition, the Treasury Department also will inject $20 billion of fresh capital into Citigroup. That comes on top of the $25 billion infusion that Citigroup recently received as part of the the broader U.S. banking-industry bailout."

http://online.wsj.com/article/SB122747680752551447.html

Bair had boasted that the deal between Wamu and JP Morgan would "not cost taxpayers a dime."

http://www.entrepreneur.com/foxbusiness/141.html

Yet in this next transaction between Wachovia and Citigroup she changed her mind and decided it was reasonable to absorb over $200 billion in losses using tax money?

Since then, FDIC moved quickly and began seizing troubled banks one after another. It also started backing bank bonds because “It would be very costly” for banks to issue the debt without the guarantee." “Bank of America Corp., Goldman Sachs Group Inc. and the financing arm of General Electric Co. led $29.8 billion of FDIC- backed bond sales... companies began using the FDIC’s Temporary Liquidity Guarantee Program on Nov. 25..." Such guarantee by FDIC even expanded internationally:

"Morgan Stanley Sells FDIC-Backed Bonds in Hong Kong Dollars"
http://www.bloomberg.com/apps/news?pid=20601080&sid=ap0ErSe8PF1A&refer=asia
http://www.bloomberg.com/apps/news?pid=20601087&sid=a3kprxkRPSyc&refer=home

Now what was wrong with this picture? FDIC is supposed to guarantee only deposits. Considering its reserve only had $19 billion (at the end of 2008) covering over $4 trillions in US deposits, why did it get involved with bond sales, not to mention it was FDIC's action on Wamu bondholders in the first place that basically destroyed the bond market?

Not only that, Sheila Bair had devised a loan modification plan to share losses and she pushed hard to get that program implemented.

"FDIC Chair Sheila Bair... outlined her ballyhooed plan to prevent an estimated 1.5 million foreclosures by the end of 2009. She plans to accomplish this feat by modifying more than two million loans at what she estimates would be a taxpayer cost of $24 billion... FDIC wants to offer private loan servicers a new incentive to modify troubled loans... FDIC would pay servicers $1,000 for every loan they modify, and taxpayers will share the losses if loans re-default... the White House estimates Ms. Bair's plan could cost as much as $70 billion next year -- not $24 billion"
http://bw.dowjones.com/article/SB122826619188174465.html

Is that FDIC's responsibility too? Because I do not see it mentioned anywhere on its website. Furthermore, was this program even effective? Not according to these articles:

"Foreclosure filings in the U.S. climbed 30 percent in February from a year earlier as the worsening economy thwarted efforts by the government and lenders to prevent homeowners from losing property, RealtyTrac Inc. said."
http://www.bloomberg.com/apps/news?pid=20601103&sid=aFS4Zbll06TU&refer=us
"Revised mortgage terms fail to curb defaults
Report shows most loan modifications don't lower payments. Delinquencies among prime borrowers soar...

Bair, a leading proponent of lowering loan payments to combat foreclosures and the damage they inflict on the economy, said many banks and loan servicers continued to provide only temporary relief to borrowers.

The report "unfortunately demonstrates a continued reliance by many servicers and lenders on repayment plans and modifications that do not reduce the borrower's monthly payment," Bair said in a statement.

Produced by the Treasury Department's bank regulators, the Office of the Comptroller of the Currency and the Office of Thrift Supervision, the report analyzed mortgages serviced by 13 large financial institutions, representing about two-thirds of all the outstanding home loans in the country.

The companies included such first-round recipients of the government's bank bailout funds as Bank of America, Wells Fargo, Citigroup and JPMorgan Chase, which collectively have received $145 billion in government money. "
http://www.latimes.com/business/la-fi-loanmods4-2009apr04,0,4466775.story

"Aid to Borrowers Not Preventing Rising Delinquency... More Help but More Defaults, Report Say"
http://www.washingtonpost.com/wp-dyn/content/story/2009/04/04/ST20090404...

In the mean time, since FDIC has been so busy expanding its jurisdiction, towns across the US suffered as a result of continuous bank seizures and more importantly, the painfully slow followup.

In Galena, Missouri, "Construction at the resort property is at a standstill and Shirato is still waiting for a first mortgage to be returned to Columbia Bank in Kansas. The FDIC put the bank in receivership in August... Shirato is expecting the FDIC to make a decision soon so work can start. “I’ve heard it so many times from the FDIC. We have a process to go through. We were originally told 30 to 60 days,” Shirato said. “It took us six weeks before we could get anyone from the FDIC to talk to us. We’ve had to let workers go because we can’t pay them.”
http://www.bransondailynews.com/story.php?storyID=10989

In Augusta, Georgia, a news article detailing "how FDIC and Government actions are bankrupting people and contributing to unemployment" was posted.

"Late last week a call from FDIC brought news that the FDIC has decided to foreclose on the White's Building, a project that up until the time of the bank's failure had been in good standing with its lenders and subcontractors... In less than 90 days the bank failure and FDIC incompetence have turned this project into a non-performing mess and nearly bankrupted our company and me personally... During this time the developers have been keeping the lights on by using funds from their personal savings and home equity loans in the hope of saving the project. They had made Augusta their home, a town that embraced them as one of their own and provided them such warmth that they were happy to give up all they had to this project."

"Loudermilk accuses FDIC representatives of everything from indifference to incompetence... Loudermilk says he has found three separate lenders willing to buy the loan from the FDIC, yet the agency is unwilling to work with him, reportedly because it would violate procedure and could possibly look like favoritism... Instead of taking one of the offers, the FDIC will most likely put the loan in a pool of non-performing loans and sell it for far less on the dollar, which, according to Griffin, is just being lazy"
http://www.mmdnewswire.com/fdic-government-actions-4738.html
http://metrospirit.com/index.php?cat=1990310070813675&ShowArticle_ID=110...

Instead of power grabbing, FDIC should be helping these people with all its resources. It should focus on assisting troubled banks in the best interest of all parties involved, like it was mandated to do so by the government. Check out this list. All the capital Goldman Sachs, JP Morgan, and others raised by selling FDIC- backed bonds could have been used to save of some of these financial institutions.
http://online.wsj.com/public/resources/documents/info-Failed_Banks-sort....

FDIC is supposed to stabilize the financial system. Sheila Bair herself said she was afraid of a Wamu bank run so she had to act immediately. So why was she creating a panic by declaring FDIC could be insolvent before the end the year and therefore it was necessary to raise bank fees? What was so different about FDIC between now and last year? Did she not realize her statement could have caused the biggest bank run in US history? In fact, within just a few days Bair made several contradictory statements regarding FDIC's potential insolvency and her concern for using taxpayers money as a solution to that problem.

March 4, 2009
"No Taxpayer Funds Bair rejected arguments that the agency should use government aid to rebuild the fund. The FDIC has authority to tap a $30 billion line of credit at the Treasury Department and legislation pending in Congress would boost the amount to $100 billion.“Banks, not taxpayers, are expected to fund the system,” Bair said. Asking for taxpayer support “could paint all banks with the ‘bailout’ brush.” "
http://www.bloomberg.com/apps/news?pid=20601103&sid=alsJZqIFuN3k&refer=news

March 6. 2009
"The Federal Deposit Insurance Corp. may reduce an emergency fee on banks to bolster reserves if Congress expands the agency’s borrowing authority with the Treasury Department to $100 billion, Chairman Sheila Bair said"
http://www.bloomberg.com/apps/news?pid=20601103&sid=aGewvZuHR3dk&refer=news

March 9, 2009
"Bair said the FDIC had enough money in its industry-funded reserves and was fully backed by the U.S. government. "The money will always be there," she said. "We can't run out of money.""
http://www.reuters.com/article/GCA-CreditCrisis/idUSTRE5282OL20090309

So the money has always been and will always be there, right? There is no way the US government would ever not give FDIC enough backing to ensure consumer deposits.

It is deceptive and unethical, to insert FDIC's request for $500 billion into the Credit Card Reform bill.

FDIC is out of control and shows complete contempt on the safety of our deposit. Who gave Sheila Bair the right to "expect her agency [to] finance as much as $500 billion in purchases of residential and commercial real estate loans?"
http://www.nbcnewyork.com/news/us_world/NATLGeithner-to-Unveil-Plan-to-....

When our Congress gave Paulson TARP, at least it could claim it was deceived because Paulson didnt reveal he was going to use some of the money to save European banks and made Goldman Sachs whole.

On the other hand, if our Congress again passes another bailout similar to TARP, when Sheila Bair has already publicly announced she was going to use as much as $500 billion for Geithner's toxic assets, then those representatives with the yes votes should resign.

In this bill, FDIC can do whatever it wants up to $100 billion and is allowed to borrow up to half a trillion requiring approval from only FDIC itself, the Fed, and the Secretary of Treasury (if Im reading this correctly that means pretty much Bair, Bernanke, and Geithner get to decide what to do with the extra $400 BILLION and they only need to REPORT a reason to Congress)-

“During the period beginning on the date of enactment of this paragraph and ending on December 31, 2010, if, upon the written recommendation of the Board of Directors (upon a vote of not less than two-thirds of the members of the Board of Directors) and the Board of Governors of the Federal Reserve System (upon a vote of not less than two-thirds of the members of such Board), the Secretary of the Treasury (in consultation with the President)…”
http://www.opencongress.org/bill/111-s541/text

This is basically a repeat of what happened with TARP, except the names and agencies have changed.

Sheila Bair= Hank Paulson
FDIC= AIG

A responsible regulator does not declare potential insolvency that could cause a huge bank run because "FDIC has enough money but wants cushion."

An intelligent regulator does not force Wachovia to sell itself to another insolvent bank Citigroup and cause Wachovia share price to plummet 90% in value within a few hours of trading, in addition to throwing over $200 billion of guarantee on taxpayers.

A well-prepared regulator does not support poor regulation of derivatives:

“[W]hen Bair was the head of the CFTC, and there was an intense debate over whether more regulation of derivatives was needed, here’s what Bair had to say (from an October 1993 Bloomberg article): THE Commodity Futures Trading Commission (CFTC) has given the US$ 4.8 trillion derivatives market a clean bill of health, saying that fundamental changes in the way the market is regulated are not needed…. “We have a strong affinity for derivatives at this agency,” said acting CFTC chairman Sheila Bair. “We like them.”"
http://economicsofcontempt.blogspot.com/2009/01/sheila-bair-hearts-deriv...

Who is regulating OTS/FDIC/SEC?

No more illegal backdating, No more guarantee except for deposits, and No more Madoff scam

That is why Washington Mutual must sue and lay the book out in open, and pray our Judicial branch still stands for truth and justice.

*imho*