Biting The Hand That Bails You Out: JPM Sues FDIC

Tyler Durden's picture

There is a saying: "don't buy the hand that feeds you" but there is nothing in popular aphorism literature about suing the hand that bails you out. Which is precisely what JPM did overnight when it sued the Federal Deposit Insurance Company, claiming the agency was responsible for over $1 billion in liabilities assumed by the bank as part of its takeover of Washington Mutual in 2008. Of course, having been the subject of a relentless battery of lawsuits by every US agency imaginable, many were wondering when JPM would strike back, or rather if it would have the temerity to sue the same government that bailed it out with billions of direct injections and even more billions in FDIC-subsidized bond issuance. The answer is yes, and as JPMorgan alleged in the complaint, the FDIC agreed to shield it from liability from lawsuits claiming failures by Washington Mutual. JPMorgan said it took on only limited liabilities in its purchase of the Seattle-based bank’s assets. What next: Jamie Dimon sues the Fed for forcing it to acquire Bear Stearns' assets at the firesale price of $2 $10 per share, in which the bank assumed Bear's assets if not so much its liabilities - after all there was a government to bail it out for that.

From Bloomberg:

"The FDIC’s indemnification obligations that are the subject of this action are a matter of contract,” the New York-based bank said in its complaint. “They are promises that the FDIC made to JPMC to induce JPMC” to buy Washington Mutual’s assets, it said.


Greg Hernandez, an FDIC spokesman, didn’t immediately return voice-mail and e-mail messages after regular business hours seeking comment on the bank’s allegations. Brian Marchiony, a JPMorgan spokesman, declined to comment on the case.

WSJ adds:

J.P. Morgan and the FDIC have squabbled over who must shoulder the burden for legal claims stemming from decisions Washington Mutual made before the deal. J.P. Morgan said the FDIC receivership that liquidated the failed thrift in 2008 should pay any claims. The FDIC has countered that J.P. Morgan is responsible.


The battle came to a head Tuesday when the New York bank alleged in its suit, filed in U.S. District Court in Washington, D.C., that the FDIC receivership hasn't honored its obligations. J.P. Morgan is seeking a portion of the $2.7 billion remaining in the receivership, which includes $1.88 billion J.P. Morgan paid for Washington Mutual's branches and deposits.


* * *


The assets in the receivership should be "sufficient," J.P. Morgan said in its lawsuit, to cover everything from a settlement with mortgage-finance companies Fannie Mae and Freddie Mac to injuries sustained by a woman who slipped on a ceramic tile outside a Washington Mutual branch to millions in unpaid state taxes. The FDIC has said previously that it didn't reject all Washington Mutual-related claims.


J.P. Morgan said in its lawsuit filed Tuesday that the FDIC pledged in a 39-page purchase agreement to protect it from such liabilities. One key section of the agreement states the FDIC receivership "agrees to indemnify and hold harmless" J.P. Morgan for any liabilities of Washington Mutual that "are not assumed" by J.P. Morgan. In exchange, the bank said in its lawsuit Tuesday, J.P. Morgan "protected" the FDIC "from potentially unprecedented liability and helped ensure the stability of the country's banking system."

As a reminder, there wasn't exactly a gun to JPM's head when it was bidding for WaMu's assets being offered in a sudden and dramatic firesale:

The fall of the Seattle thrift was the biggest commercial-banking failure in U.S. history, and it presented immediate benefits to J.P. Morgan, expanding its network across the U.S. for the first time. The FDIC chose J.P. Morgan's bid over a competing offer from Citigroup Inc.

But while JPM was happy with purchasing WAMU's assets at pennies on the dollar, it seems it had some reservations about the liabilities. As for JPM's strategy, it is quite clear: divert attention from the possibility of even more billions in legal provisions.

J.P. Morgan reiterated in its lawsuit that it separately expects the FDIC receivership to cover any potential damages resulting from a private lawsuit brought by Deutsche Bank National Trust Co. seeking as much as $10 billion on behalf of more than 100 trusts holding poorly performing bonds issued by Washington Mutual. J.P. Morgan and the FDIC already have disagreed in that case over who ultimately is liable for those claims.

Will the US government - engaged in a push to "punish" banks for what has largely been a failure to govern and supervise effectively and thus also divert attention from its failings - settle with JPM, or will this merely enrage the Department of Justice and seek even more punitive damages (if no prison sentences - never prison sentences) from JPM management remains to be seen. One thing is certain: JPM's lobby spending in the next year is set to break all records - after all politicians have made it quite clear they demand much moar from the Wall Street lobby.

Full JPM complaint below.

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Disenchanted's picture

""don't buy the hand that feeds you""

LOL! Hells bells man, they already own the hand that feeds them.

Popo's picture

Does anyone expect the career pussies at the FDIC to do anything other than bend over and take it?   These guys had so many opportunities to influence the industry and force a downsizing of megabanks, but instead they habitually got down on their knees and serviced Misters Dimon and Pandit.  I expect them to handover whatever is asked for and that includes refusing the vaseline AND the reach around.  Any employee of a financial regulatory agency is by definition a little faggot.  Start lubing up boys.  Papa's coming for you again.

knukles's picture

Oh the arrogance of it all
- Hindenburg Omen 64

It is contractual

It's just a tax (payer money)
- Chief Justice Roberts

aint no fortunate son's picture

and speaking of Bear Stearns - Dimon was a Class A director (senior director) of the NY Fed when he was "forced" to buy Bear (at least it's assets if not so much it's liabilities) at $2, or oops $10 a share... isn't that sorta like insider trading?

This effin rot and hypocrisy just keeps going on and on and on...

SafelyGraze's picture

we would gladly pay the one billion dollars mister diman is suing for if only we had it.



GetZeeGold's picture



.....and a pair of magic rule them all.

GetZeeSilver's picture it is going to be a magic suit...compliments of your very own...Hil Dog Clinton 2016.

This invisible suit/cloak is going to allow Jamie to disappear once he rapes what is left of the USSA economy!


PT's picture

20 years ago, someone tried to get me interested in public speaking.  They offhandedly remarked how some speakers get paid huge fees because they are THAT good!!!  Couple of years ago, I worked out the real reason why their speeches were "worth every penny".

Sometimes I feel like I'm rreeeeaaallll slow!

PT's picture

Jamie and the Magic Cufflinks ...

TideFighter's picture

The FDIC Deposit Insurance Fund is to remain underfunded until at least 2017. Even after collecting a projected 100 billion dollars in a three-year period, the FDIC/DIF Percent of Insured Deposits Ratio is an appaling negative number (not enough to cover accounts). It used to be that FDIC could cover 3% of insured deposits, now it is a negative number. The FDIC is a wounded animal, and JPM, as it always does, sees it last chance at easy prey. 

RiverDrifter's picture

I don't know about negative but as of 2012, the amount in the FDIC insurance fund covered about 0.0025% of total deposits in FDIC-covered accounts.  Think they had $13.5 billion to cover $5.5 Trillion....

knukles's picture

Ah, pshaw...

FDIC is Full Faith and Credit.
Jellin' can just print more.

freewolf7's picture

It's always fun to watch two criminals testifying against each other. Get ready for a lot more information.

onewayticket2's picture

maybe JPM knows the QE spigot is already turning off....

papa's gotta get PAID! 

peter4805's picture

The thieves always start fighting over the spoils eventually.

TeamDepends's picture

Ha ha!  They are turning on each other!

Sudden Debt's picture

And the one who'll survive get's to be hanged...

the not so mighty maximiza's picture

hopefully a sign we are entering the final act

buzzsaw99's picture

dimon has ballz the size of church bellz

kralizec's picture

Don't pull on the rope...just wrap it around the neck...

UH-60 Driver's picture

Cats and dogs sleeping together...

Bryan's picture

Wild dogs fighting over the last bit of rotten meat.

JmanSilver.Gold's picture



Jimmy Demons illegal plot to steal WAMU from its bondholders and shareholders, since 'expanding on the west coast would be cost-prohibitive'.

JPIG even had a separate 'WARROOM' for PROJECT WEST, which went into full effect when gutless pussy Kerry Killinger refused JPIGs insulting 'buyout bid' of $4 PPS when WAMU was trading at $13.  The illegal short selling fraud game started immediately, with help from the Squid as always.

The FrauDIC, run then by 'star struck with Jamie' homely looking corrupt stupid fucking cunt Bair, was in on this massive fraud the whole way down (pun intended).

What is NEVER mentioned, is that the same corrupt government / FrauDIC REFUSED TO ALLOW WAMU to transfer $20 billion in cash from one of its sub-banks to the WAMU main bank during late September 2008, because then the true solvency of WAMU would be known.  WAMU was NOT insolvent, JP WHOREGAN was.  The 'bank run' blather is total bullshit.   The corrupt government . FrauDIC hinted that the $16 billion in banking system outflows all came from WAMU, which is more bullshit.  Even if true, it was less than 10% of WAMUs deposit base at the time.  The final deposit base honeypot that Jimmy got was a measley $188 billion.  Poor bankster asshole.

As Jimmy and JPIG booked the $264 billion gain (by his own admission), he was giddy as a schoolgirl.  Gifted all that, all the WAMU real estate and branch offices (remember , cost prohibitive expansion !), for SUPPOSEDLY $1.88 billion paid to the FrauDIC, run by cunt bair.  Money that WAMU bank bondholders were NEVER paid, due to more corrupt bullshit shenanigans in the Kangaroo Bankruptcy court of Mary Fucking Walrath, Delaware.  The shit that went on in that so-called bankruptcy case is beyond uber-corrupt, and too long to mention here.

Bottomline, Dimon and JP Whoregan pulled off the bank robbery of evermore, with help from the very same FDIC that it is now suing over shekles.  Rot in hell Jimmy Demon, you total fucking bankster prick.

Taxpayers, you will be paying again.  Nothing you didnt know already.  Think about that when you 'bank' at Chase.

Jman out.

frankTHE COIN's picture

And they got to look at WaMu's books earlier in the year but did'nt make a formal bid. Once they got the company they wrote down 39 billion to 3.9 billion and Then only paid the 1.88 billion for that so they booked a profit of 2.1 billion for buying WaMu Johnny on the Spot.

Relayer74's picture

It simply amazes me how short the memory is at times.

At one point I started on a spreadsheet to help me track all the, uhm, mistakes that occurred in the financial/power arena. I gave up in disgust when I realised it would be impossible to do without going to multiple sheets and 3D.

venturen's picture

WTF....why don't they just sue the American people and take the rest. Isn't $85 Billion a month enough? What crooks

yrbmegr's picture

Technically, that is exactly what they're doing.

Dr. Engali's picture

I guess the FDIC hasn't seen Dimon's presidential cufflinks. Maybe he needs to give them a good polishing and use some flamboyant hand gestures.

GetZeeSilver's picture

Where's Andrew Jackson when you need him..."I killed the bank."  #hangthebankers

Cheyenne's picture

JPM got $39.7 billion in bailouts from the FDIC's Temporary Liquidity Guarantee Program alone, just weeks after it got $25 billion in TARP and $62 billion from the Fed's AMLF bailout. (TLGP) (AMLF)

The significance of the timing is that the FDIC's $40 billion bailout of JP Morgan was a wholly voluntary decision made by Jamie Dimon, who needed that bailout despite having just gotten $87 billion in the 2 other bailouts. So Dimon flat out lied to the Senate last year when he said JPM didn't need to be bailed out.

Of course, the Senate didn't put him under oath, which is congressional SOP for any witness who's about to lie his ass off. See Clapper, James. Without an oath, of course, perjury charges will not stand, man.

Cheyenne's picture

Oh, and by the way, for all the rubes who bought the recent yarn about JP Morgan being "forced" into taking over Bearn Stearns, you need to stop watching TV and wake the fuck up. That was yet another bailout of Lyin' Dimon.

frankTHE COIN's picture

I just read it. That was Great Information and a Must Read !

Papasmurf's picture

Putthing things in perspective:

FDIC has $33B in their war chest.  JPM has $2,155 $B in liabilities, not counting off-balance sheet stuff.  Shareholder equity is $204B if nothing blows up.  The London whale lost $6.2B before discovery.

Hobbleknee's picture

Let the games begin!

philosophers bone's picture

It would kind of be interesting if FDIC went tits up....  FDIC gets drained, then the "bank bail-ins" happen over a weekend.  Oh, about those "insured" deposits.....

Abrick's picture

Always buy the hand that feeds you!

fuu's picture

Funny watching two technically insolvent institutions fight over table scraps.

Diogenes's picture

Any dog that bites the hand that feeds it, will lick the boot that kicks it.

kenezen's picture

I have a different take than most. I'm old enough and have been in related industries to these large banks. I do know a bit about derivative composition since the middle eighties. I was aware of the prospect of over-leaverage in the CDS market that existed in 2007-2008 and the very poor composition of Sub-Prime Loans. I was very aware of the Mad scramble of Origination firms including the large Banks to take the message of Franks and Dodd that "All people should have a purchased home" and then performed mirror tests while using by cheapest bid from badly structured outsourced Servicing corporations, in many cases, to fulfill back-end duties. They used conduits from hack processors to get millions of these poor loans to fund and convert to derivative structure. 

JP Morgan was at that time under Jamie Dimon. Jamie in the late nineties and early 2000's railed against the weakening underwriting standards pushed BY Dodd & Frank. (That was the primary cause of the Sub prime crash). It wasn't Jamie that allowed Glass Steagall to fall under Greenspan's pressure. It was not Jamie in the 2000's that allowed underwriting under, the less intelligent, President Bush to continue to disaster!

No it was our "Politicians" And, It Was the majority of banks greedy enough to plunge headlong into this race to financial oblivion YES!

But who came out of that quagmire best without as much damage as the rest? It was Jamie! And JP Morgan. I do remember the Government pumping many billions into BofA and others. But, very little into JP Morgan. Jamie Dimon was and is the finest mind running a Bank in Wall St. There has been, for his arrogance and fighting nature, pursuit of retribution. It's odd because he is a Democrat!

Look at the true histories of the different banks of the early 2000 and on. Don't look at the hit pieces. Who used less tax payer money to get back on their feet? It was Jamie. There were idiots in some Banks and, some are still there.      

HamRove's picture

Divide and conquer! The money well is dry and the maniacs are fighting for a drop of water to stave off the inevitable. I'm Lovin' it!