Tuesday, July 8, 2014
Who is to Blame for the Run on Washington Mutual?
Who is to Blame for the Run on Washington Mutual? Maybe There Should Be a Lawsuit FDIC Insurance was Supposed to Prevent a Run on Banks: What Really Happened in the Washington Mutual Collapse? Lex Loeb Contributor Network . Washington Mutual employees maintain that their bank was still solvent until after the news media caused the run on bank deposits that ultimately destroyed the company. I saw it on television myself. Before the Run on Washington Mutual there was the Senator Charles Schummer inspired run on Indy Mac. For years and years the FDIC deposit guarantee was spelled out on signs in bank Lobbies across the nation and every account opened at every US FDIC insured bank had the deposit guarantee printed on forms to open accounts. Watching CNBC and Bloomberg I was amazed that even these financial new experts seemed to be encouraging bank runs as if it were some new fad or popular sport. The more thought given to what happened in the collapse of Washington Mutual the more the blame seems to point to the news media. I am wondering why there is no lawsuit against the news outlets on behalf of Washington Mutual share owners who lost money. Watching Bloomberg and CNBC it seemed their reporters and journalists seemed to have some idea that there was some time limit that Washington Mutual would need to sell itself off to another financial institution. Why a time limit? Since when did the army of international short sellers have a cause to destroy a financial institution if it did not sell it self in less than 7 days? The whole exercise made no sense. Some might call it existential absurdity. Chase Manhattan bank got control of Washington Mutual and is proud to have gotten control of a company that has proved to have plenty of liquidity after all the panic caused by the news media. Another question is why did the federal government put a time limit on marking assets to market as if to intentionally cause the international banking fiasco? If you read Warren Buffet's Investment statements he clearly says that his form of value investing is to buy when stocks when the markets fail to recognize underlying value. That clearly means buying when marked to market, In its infinite wisdom and in the name of 'transparency" the US congress passed the Sarbane Oxley legislation that changed accounting principles such that Underlying assets owned by publicly traded corporations would have to be valued on their books at market prices. Just because the market is irrational one day does not mean that giant corporations should be rendered insolvent by revaluing their assets to the day's new market prices as they fluctuate wildly when the market is most irrational. Major News Media operations just seemed to conspire with short sellers and their vocal leaders to tell people they should go out and create a run on bank based on speculation that the FDIC insurance would no longer be valid. Washington Mutual was not the first company taken down in this fashion. It seem seem to be becoming a sort of fad and sporting event. The News Media had lost its objectivity and was pushing the doom and gloom of professional short sellers with the seeming intent to see if they could topple yet another corporate giant. Why Washington Mutual? Washington Mutual had a lot of popular support and name brand retail banking recognition above and beyond companies like Lehman and Bear Sterns and that made it a much better news story with a handle. It became a see, it could happen to you story and now it is and as it happens the ratings statistics for financial news television was off the charts starting around then. About the same time the Fox all business news cable channel appeared out of nowhere competing against Blomberg and CNBC. It was not just financial news stations giving people the idea that they should have a run on an insured bank as the regular net work news was giving people the same idea. People who never before watched financial news started really paying attention when banks they knew about became the prime time targets. With viewership ascending at the time it is clear that the news media was having the desired effect. The news media knew very well that the government was going to have to step in if a run on a bank occurred so it seems that they targeted Washington Mutual in order to get the best possible ratings in making a theater event out of helping to cause the collapse of a bank a lot of people recognized as their own. Some speculate that part of the reason fostering the financial crisis was to help get Obama elected. Getting a bigger audience seems to be what they were really after. I turned on the television and kept hearing that Washington Mutual has a dire need to merge with another bank, It is true that the management had taken private equity money and diluted shareholder value prior to the panic and they were looking for more money to recapitalize there were other options including laying off lots of people or cutting expenses. There was no time limit even if assets were marked down below cost on a quarterly statement even. The run on the bank that resulted did not make much sense. Understandable that anyone with over the federal insurance on deposit limit should have immediately withdrawn money from their accounts but in true FEMA fashion instead of sending out FDIC representatives to assure people their deposits were safe it seems the FDIC and the US treasury were in a hurry to destroy Washington Mutual or at least make it a source of new capital to bigger ailing banks. Back in the days of the resolution trust company the government was caught shutting down perfectly solvent banks and the assets that Court later refunded to shareholders. One of those banks that was hit was far west financial that was based in Portland , Oregon because it was never really illiquid. This is why it seems strange that there are no attorney's offering to help shareholders who lost money on their investment in Washington Mutual sue the news media corporations that really did seem to put Washington Mutual into play as a banking disaster. The news media got their self fulfilling prophesy when Washington mutual was forced to give itself over to JP Morgan Chase. I know people who decided to take their money out of Washington Mutual because they were listening to the new media reports. They were being misinformed by the mass media. The News media got the financial news action they were hoping for so maybe they should get hit with some of the responsibility and liability for the harm they helped cause the bank's shareholders? . Close