WaMu bankruptcy settlement receives FDIC approval

25 May 2010

The Federal Deposit Insurance Corporation (FDIC) has given its approval to an agreement settling a dispute related to the failure of Washington Mutual (WaMu).

According to the body, the settlement resolves claims made after the FDIC took over WaMu when it failed in September 2008.

It also applies to a dispute between WaMu and JPMorgan Chase after the latter acquired the bank.

Michael Bradfield, FDIC general counsel, said: "This agreement will result in substantial recoveries to the receiver and resolve potential claims that could have taken years and millions of dollars to litigate.”

WaMu was holding the WaMu bank, which was then seized by FDIC after it went bankrupt.

It was subsequently acquired by JPMorgan for $1.9 billion after it filed for bankruptcy protection but, since then, the three organisations have argued over which assets belong to whom.

The settlement is expected to see WaMu establish a liquidating trust, which will redistribute funds among its creditors.

Approval of the global settlement is now subject to regulatory approval following a hearing at the US Bankruptcy Court for the District of Delaware in June.

By Jim Ottewill

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