Washington Mutual Bank was seized by the Office of Thrift Supervision in September 2008 in the biggest bank failure in U.S. history. The FDIC was then appointed receiver and immediately sold the bank to JPMorgan Chase & Co for $1.9 billion.
Now a federal judge has ruled that the Federal Deposit Insurance Corp must face a $10 billion lawsuit tied to the failure of Washington Mutual Bank. The judge refused the FDIC’s request to dismiss the lawsuit files by Deutsche Bank National Trust Co over bad mortgages that were securitized by Washington Mutual.
The Deutsche Bank unit filed its lawsuit in 2009 arguing that loans that were pooled into mortgage bonds did not meet the underwriting standards that had been promised by WaMu, causing investors to lose billions of dollars.
A Senate committee report this year said WaMu’s mortgage securitization was “polluting the financial system” with bad home loans and partly to blame for the 2008 financial crisis.
The FDIC argued it should be dismissed from the lawsuit and Deutsche Bank should bring its claims against JPMorgan, which assumed WaMu’s liabilities as well as assets.
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