21/02 F.D.I.C. Is Said to Weigh Suing Leaders of Washington Mutual

February 21, 2011
By ERIC DASH

The Federal Deposit Insurance Corporation has sent letters to several former executives of Washington Mutual warning that it was considering taking legal action tied to their role in the collapse of the savings bank, according to a person with knowledge of the matter.

F.D.I.C. officials have discussed seeking damages of up to $1 billion, but the talks are still continuing and the agency could decide to drop its claims against all or some of the former executives, this person added.

It was unclear when any final decision would be made. An F.D.I.C. spokesman, Andrew Gray, declined to comment on Monday.

The bank’s critics argue that Kerry Killinger, Washington Mutual’s longtime chief executive, oversaw an aggressive push into risky subprime mortgage lending that ultimately drove the bank to the brink. But Mr. Killinger and other WaMu officers denied any wrongdoing, insisting that they acted prudently but fell victim to the turbulent markets of 2008.

The news of the letters was first reported by The Puget Sound Business Journal.

The F.D.I.C. has filed four civil lawsuits against former directors and officers at hundreds of banks that were closed during the financial crisis. Any claims against former executives of Washington Mutual would not be unusual, though the case has already been one of the agency’s biggest and most controversial seizures.

F.D.I.C. regulators closed Washington Mutual in September 2008, selling its assets and branches to JPMorgan Chase for $1.8 billion. That deal has come under scrutiny from WaMu bondholders, who have spent two years waging an attack against JPMorgan and the F.D.I.C. over how to split up the remnants.

The courtroom battle has also spilled onto Capitol Hill, where lawmakers have held hearings over whether Washington Mutual was prematurely shut. At a Senate subcommittee hearing last April, Mr. Killinger testified that his company had been treated unfairly and “should have been given a chance to survive.”



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