The parent company of imploded Seattle savings and loan giant Washington Mutual Bank has finally gotten the go-ahead to exit bankruptcy proceedings after more than three years of brutal legal battles.
Judge Mary Walrath of the U.S. Bankruptcy Court in Delaware had twice rejected reorganization plans filed by Washington Mutual Inc. She OK’d the latest plan Friday after WaMu sweetened its offer to dissident creditors who had invested in the company’s distressed debt.
For the record, 11:02 a.m. Feb. 17: A photo caption with a previous version of this post incorrectly identified Los Angeles City Councilman Richard Alarcon as former Councilman Richard Alatorre.
WaMu, the nation’s largest thrift, had aggressively sold subprime and other high-risk loans that toppled the home-loan industry, created rot in the huge global markets for mortgage bonds, and ultimately triggered the financial crisis.
Federal bank regulators closed the giant thrift in September 2008 and sold it to New York's JPMorgan Chase & Co.for $1.9 billion, giving Chase a big retail presence in California. It was the largest bank failure in U.S. history: Washington Mutual Bank had more than 2,200 branches and $188 billion in deposits.
The bankruptcy proceedings had been marked by harsh litigation involving parent Washington Mutual Inc., JPMorgan Chase and the Federal Deposit Insurance Corp.
The plan approved Friday calls for about $7 billion to be distributed to creditors and includes significant recoveries for shareholders. The complicated agreement to address the complaints of the distressed-debt investors was reached Thursday.