WILMINGTON, Delaware — The Federal Deposit Insurance Corporation has challenged Washington Mutual Inc.’s request for bankruptcy court approval of a US$4.4 billion cash transfer from JPMorgan Chase Co. In court papers filed Monday, the FDIC said it may have “significant claims” against WaMu and to the funds, which WaMu contends are part of its bankruptcy estate. WaMu, parent company of Washington Mutual Bank, filed for Chapter 11 reorganization along with its Washington Mutual Investment Corp. affiliate on Sept. 26. The filing came one day after the Office of Thrift Supervision appointed the FDIC as receiver for Washington Mutual Bank and its banking subsidiaries, including Washington Mutual Bank FSB. After being appointed receiver, the FDIC sold WaMu’s banking assets to JPMorgan Chase for US$1.9 billion. WaMu now claims that it is entitled to take possession of about US$3.7 billion it had deposited in Washington Mutual Bank FSB, and another US$707 million on deposit with Washington Mutual Bank prior to the receivership.
“The debtors believe there is no question that the deposits constitute property of the debtors’ estates,” WaMu said in a filing last week seeking court approval of an agreement it has reached with JPMorgan Chase to transfer the funds.
But the FDIC said in a court filing Monday that there is no need for the court to approve the transfer at this point, particularly since all the deposit account information has not been documented. “In light of the FDIC’s statutory authority, the seriousness of the issues, the amount of funds to be transferred and the fact that the debtors have no need to use the funds at this time, there is no need to disturb the status quo,” attorney M. Blake Cleary wrote on behalf of the FDIC. “The debtors cannot pay their unsecured creditors prior to confirmation of a plan and they have substantial other resources to fund the administrative expenses of their Chapter 11 cases.” Attorneys for a group of Washington Mutual Bank noteholders also filed an objection to the fund transfer Monday. “No bank would ever let someone walk up to a teller window and withdraw even one dollar from an account without confirming that the account was actually established and that the account actually belonged to the customer,” the noteholders said in their filing. The FDIC said it believes it can work out a stipulation with WaMu that would provide the FDIC the same protections afforded to JPMorgan under the proposed transfer agreement.