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obama one big ass mistake America
Washington Mutual holding company sues FDIC
The holding company that owned Washington Mutual is calling shenanigans on the FDIC, arguing that the true worth of Washington Mutual was much more than the amount for which the FDIC sold it to JPMorgan Chase.
SEATTLE – Washington Mutual's holding company is suing federal regulators for billions of dollars, saying the firesale of the bank's assets to JPMorgan Chase violated its rights.

The lawsuit was filed Friday in federal court against the Federal Deposit Insurance Corp., which seized the Seattle-based savings and loan in September. It was the largest bank failure in U.S. history.

Lawyers for the holding company, Washington Mutual Inc., argue that the bank was worth more than the $1.9 billion JPMorgan paid for it in a deal arranged by the FDIC. The lawsuit argues that if WaMu's assets had been liquidated prudently, they would have been worth more than that.

Indeed, if the free market had been allowed to function then JPMorgan Chase and other companies would have had to compete for Washington Mutual at market prices. The very act of buying part (or all) of Washington Mutual would have drive up the share price. The takeover of Wachovia, complete with a bidding war between Citigroup and Wells Fargo, was just such a situation, proving that banks could be taken over without a single taxpayer dollar being used (though the FDIC did meddle in that transaction as well).

Anyone who knows the history of the S&L problems from the 70s and 80s knows that forced sale of Washington Mutual is exactly the same kind of stunt the Resolution Trust Corporation would pull when it was given the power to liquidate financially "troubled" S&Ls. Frequently firms would be told on one day they were sound or were to purchase less solvent entities under the program, only to be taken over the next day for being "unsound".

The free market is far better at allocating resources and recovering them than any political entity ever will be.

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stupendous advocate text
More on that "free market" stuff going on at Freddie and Fannie
Once again, proof that it wasn't free markets at play!
Andrukonis and others expressed concern about another type of mortgage Freddie was buying, where neither income nor assets were stated on the loan application. Andrukonis said these were popular with Hispanic borrowers, but the delinquency rates of 8 to 13 percent were much higher than on conventional loans. People familiar with the matter said Freddie was being pushed by advocacy groups to come up with new loan products to offer to low-income and minority borrowers.

Emphasis mine.

Anyone want to place bets on which "advocacy groups" were applying the pressure?

And for those who keep claiming "it was the banks!" I say that's like arguing whether the chicken or the egg came first!
Despite these concerns, Fannie continued to push into this new market. A business presentation in 2005 expressed concern that unless it didn't, Fannie could be relegated to a "niche" player in the industry. Mudd later reported in a presentation that Fannie moved into this market "to maintain relevance" with big customers who wanted to do more business with Fannie, including Countrywide, Lehman Brothers, IndyMac and Washington Mutual.

Emphasis mine. Notice anything in common among those four companies?

And they were taking their cues from Freddie and Fannie!
The documents suggest than Fannie and Freddie knew they were playing a role in shaping the market for some types of risky mortgages. An e-mail to Mudd in September 2007 from a top deputy reported that banks were modeling their subprime mortgages to what Fannie was buying.

Nothing like a horrible business model combined with competition to see who can implement it on a larger scale!


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