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by Vault Law Editors | September 26, 2008


Big Gov is evil. It makes you wear bike helmets and seatbelts and pay for your employees’ healthcare. Of course, when you extend far-fetched loans, overreach yourself in acquisitions, screw up your business, squander your customers’ life savings and face monumental ruin, then Big Gov is, like, an OK guy. Mind the distinction.

The latest federal busybodying happened before midnight on September 25th, as regulators finally seized control of 119-year-old Washington Mutual—making WaMu’s forced sell-off the greatest bank failure in history. (The spectacular collapse far overshadows the 1984 failure of Continental Illinois in Chicago, and the demise of IndyMac, seized by regulators in July 2008.) The Feds were nervously monitoring WaMu for weeks, desperately trying to matchmake a buyer. The alternative was ugly: shelling out another $30 billion from federal deposit insurance coffers, already depleted after IndyMac.

After launching a secret, government-led bidding war on Wednesday, September 24th, regulators sold off virtually all of Washington Mutual to coupon clipper JPMorgan Chase for the Dollar Daze blowout price of $1.9 billion. JPMorgan had acquired Bear Stearns just six months ago in a similar, government-brokered shotgun wedding. In both deals, JPMorgan was led by Sullivan & Cromwell Chairman Rodgin Cohen, who is joined by New York partner Mitch Eitel. Cohen is 2008’s rockstar, serving as the key legal player in the Fannie Mae, AIG and Goldman Sachs crises. WaMu was led by Simpson Thacher partner Lee Meyerson.

Now this warms the heart: WaMu’s spankin’ new CEO, Alan H. Fishman—who suited up less than three weeks ago—is eligible for $11.6 million in severance, and is keeping his $7.5 million signing bonus. This to a man who wasn’t even told the bank was being sold.

Ah, new feudalism at its finest, bank customer peasants subsidizing the gentry. How many centuries til the Revolt?

- posted by anu rao


Filed Under: Law

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