WASHINGTON MUTUAL BANKRUPTCY CLASS ACTION LAWSUIT Research Paper - 1

WASHINGTON MUTUAL BANKRUPTCY CLASS ACTION LAWSUIT - Research Paper Example The total collapse of WaMu would have been disastrous for the Government. Besides, the FDIC is not in the banking business and a last minute deal was brokered between the Government and JP Morgan Chase. The same day as the takeover, Chase purchased the bank from the FDIC for a little less than two billion and agreed to assume all secured debts, minus equity shareholders. With that Chase became the one of the largest banking firms in the country (Dash). WaMu’s parent company, Washington Mutual, Inc., was left with just twenty-five billion dollars in assets minus liabilities and filed a voluntary petition for Chapter 11 Bankruptcy protection the very next day, September 26 in its home state of Delaware. The Bankruptcy itself has been an ongoing issue for three years now and is still in litigation. With the FDIC and Chase agreeing with WaMu in principal, the company’s proposal was that seven billion dollars was to be distributed to its creditors. However, the plan was rejected on September 14, 2011 by US Bankruptcy Judge Mary Walrath in Wilmington. Siding with the plaintiffs, she ordered the two sides into mediation. As such the company’s stock plummeted more than seventy per cent in the days following the judge’s ruling. Why then did a bank formerly known as the â€Å"Wal Mart of banking† fail so completely? It was for the same reasons a lot of financial firms fell during the summer and fall of 2008. During most of the first decade of the twenty-first century, credit was cheap and easy to come by. The so-called â€Å"sub-prime† consumers, those with far less than stellar credit, were able to obtain credit cards and home mortgages when they would have probably been turned down any other time. WaMu was almost leading the charge, with its Providian credit card division. It also controlled a likewise now