JPMorgan buyout opposed by FDIC

31 March 2010

A tax refund for JPMorgan valued at $1.4 billion has been opposed by the Federal Deposit Insurance Corp (FDIC) and Washington Mutual (WaMU).

JPMorgan acquired (WaMu) for $1.9 billion after the failed firm was seized by the FDIC in 2008.

The investment bank is now thought to be looking to exploit a legal loophole which allows firms to apply losses against taxes paid during the last five years.

Initial reports suggested that FDIC supported the payout to the bank but it has subsequently changed its position.

It is now thought that the loophole prevents companies which received financial support as part of the Troubled Asset Relief Program, such as JPMorgan, from collecting a tax refund.

William Isaacson of Boies, Schiller & Flexner LLP, said: “JPMorgan Chase is claiming $2.6 billion in tax refunds created by the stimulus bill that it does not own and which Congress intended to go to others.”

He added: “We plan to work constructively with the FDIC and the other parties to attempt to reach a resolution of the issues that will provide a fair and beneficial settlement for bondholders and the receivership estate."

WaMu went bankrupt in September 2008.

By Jim Ottewill

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