WaMu’s last days as told by executives letters to the FDIC

In the last days before WaMu was seized and sold to JP Morgan Chase in what turned out to be an immensely profitable deal for Chase, Washington Mutual executives sent a series of letters to the FDIC trying to convince them that WaMu was sufficiently capitalized and did not need intervention.

WaMu’s outflow of deposits had “moderated substantially” following the September 2008 collapse of Lehman Brothers, wrote CEO Alan Fishman and Chairman Stephen Frank in the September 24, 2008, letter to regulators. One day later, regulators took down WaMu and sold its banking operations to J.P. Morgan for $1.88 billion.

What’s more, the thrift had a plan to create $19 billion more in capital “without a penny of government assistance.”

The letter, WaMu’s last hope of survival after it failed to secure a buyer on its own, was addressed to Federal Reserve Vice Chairman Donald Kohn, Federal Deposit Insurance Corporation Chair Sheila Bair and OTS director John Reich.

The document includes a plea for leniency. A seizure “of a large, well-capitalized U.S. banking organization,” Mr. Fishman and Mr. Frank wrote, “is without precedent in U.S. history and will send a stark message to bank customers and investors. We think there is no reason to take such a dramatic step when our proposal would, quickly and simply, create $19 billion more capital for WaMu and reposition it to easily withstand the current market turmoil – all without a penny of government assistance.”

Read the entire story at WSJ.com

There appears to be some significant reason for doubt that Washington Mutual would have failed if intervention by the FDIC had not occurred.

Chase freezes 56,000 foreclosures due to incorrect documents

We’ve reported a few instances where Chase has filed foreclosures without the proper documentations that it actually owns the loans or has proper authority as servicer of the loan to foreclose.  In one case that we’ve found, Chase couldn’t prove it owned the loan and the balance was dismissed by a judge.

It looks Chase’s documentation problems are a lot more widespread that the few cases we’ve seen, as they’ve just announced they are freezing 56,000 foreclosures because Chase employees signed off on documents without having properly reviewed them.  Mind you, this is only the foreclosures, there are hundreds of thousands of additional loans that are delinquent that Chase may not be able to prove they own or have the right to foreclose as the loan servicer.

If you have a mortgage with Chase and are having problems, you may benefit by asking Chase to prove it has the proper documentation.  In some cases they will not be able to prove this and you may have the leverage necessary to negotiate much better terms on your loan.

Update 10/1/10:  Ohio is now asking Federal prosecutors to investigate possible defects in legal papers for thousands of foreclosures in Ohio.

Is JP Morgan Chase looking to triple dip in the WaMu deal?

Chase clearly got a steal of a deal when it acquired the assets of Washington Mutual for under $2 billion in 2008.  With the deal, they got 2000 branches, $188 billion in sorely needed deposits and some huge potential gains on assets that they initial severely wrote down.  Additionally, they negotiated a heck of a deal with Fannie Mae and Freddie Mac so as not to be responsible for any of the loans WaMu sold off to investors blowing up.  Their deal was so good, they recently estimated that they stand to make about $25 billion from Washington Mutual’s mortgages above what they original estimated in 2008.

So why do they keep trying to go back and get an even better deal?

For one, they have been trying to grab some of Washington Mutual’s $6 or so billion in tax credits for two years now.

Now, some leaked letters that JP Morgan Chase sent to the FDIC indicate that they are demanding the FDIC pay them more than $6 billion to cover the costs of WaMu related lawsuits.

Seriously?  Even with $6 billion in lawsuit related costs, how was this not a smoking good deal for JP Morgan Chase?  Aren’t they getting a little greedy?

double triple

To avoid skimmers, hide your PIN when using an ATM

Here is some footage police recovered from an actual pinhole camera that thieves installed at an ATM in the UK.  You can clearly see that covering up the keypad when entering your PIN is an effective way to thwart thieves from getting your PIN.

While they might still skim your card number, and be able to attempt to charge your card using credit mode, it will keep them from using your debit card/PIN combination.  This is important because some banks, especially Chase, have proven to be much less forgiving when it come to protecting you against debit card fraud when your PIN number is used.  If your card is used along with the PIN number, Chase may claim that you made the charge personally.

Is Chase.com having problems again?

One reader wrote us this morning at 9 am ET:

I logged onto my credit card account this morning. It let me in but everything says “Not Available”. That is the balance, payment due, minimum due, etc.

Is Chase having troubles again?

Incidentally, the apologies on Chase’s front page from the last outage are gone now.

Why debit cards are a bad deal

Debit cards are at the heart of the battle between consumers and banks.  Until the overdraft protection laws from the Credit Card Act of 2009 took affect in August of this year, banks made $38 billion a year in overdraft fee income.  Banks can still reap huge rewards from the overdraft income stream by cajoling consumers (like Chase does) into signing up for voluntary debit card overdraft protection, or by allowing ACH transactions linked to debit cards (automatic payments, PayPal money transfers) to go through despite resulting in a negative balance.

An article in the Wall Street Journal today outlines another reason why using your debit card is not a good idea; your exposure to losses related to theft is far inferior to that if your credit card.

One of the big selling points of debit cards, highlighted in ad campaigns and on bank websites, is that you’ll have “zero liability” for losses if your card is lost or stolen—just like credit cards.

Turns out that’s only sort of true.

In fact, nearly every debit card comes with restrictions in cases of theft. Some banks limit your coverage if you are slow to report a lost card or potential fraud. Some don’t cover fraudulent ATM transactions. Some may require that you show “reasonable care” in protecting your card or PIN number.

The matter is a significant one. There were 38.6 billion debit-card transactions last year, far more than the nearly 23 billion credit-card transactions, according to the Nilson Report newsletter in Carpinteria, Calif. Banks encourage customers to use debit cards, since they are far more lucrative than cash or checks.

The loopholes grow out of different federal regulations for different cards. Under federal law, your losses from unauthorized charges on your credit card are limited to $50, and there is no time limit for when you must report the problem. Many issuers go further, waiving all losses due to unauthorized credit-card use.

Debit cards, by contrast, are covered under a different law, and the rules are much more complex. If you call your bank within two business days of discovering your card is missing, your losses are limited to $50. But if you wait, you could be on the hook for up to $500. And if you don’t report the problem within 60 days after it shows up on a statement, you might face unlimited losses.

In the late 1990s, and went beyond those requirements, promising reduced liability for their branded debit cards. But there are several loopholes: Visa’s “zero-liability policy” doesn’t cover ATM transactions, some business cards or PIN transactions that don’t go through the Visa network. It does cover transactions where you sign, which bring in more revenue than PIN transactions.

MasterCard doesn’t cover any transactions that require a PIN, and it won’t cover more than two theft events in a 12-month period. You must also exercise “reasonable care” to prevent your card from being misused. But that term is subject to interpretation. Have you failed to show reasonable care if you forget your card at a restaurant? That depends on the circumstances and your bank, a spokeswoman says.

Read more …

It is very easy for a bank to simply claim that you didn’t use sufficient care in protecting your debit card, or that there is no evidence of fraud (i.e. they accuse you of falsely calling a transaction you did as fraud), sometimes despite evidence that you were thousands of miles away.

Overall, you are better off using a credit card for transactions that you want to do electronically and then paying the bill off in full every month.

Chase lost paperwork and delayed response not limited to loan modification

Here is a recent experience by someone dealing with an insurance claim due to a burst water heater.  The insurance company paid the check immediately, but Chase dragged its feed and caused all kinds of problems.

On December 24, 2009 the water heater in my home went. There was 40 gallons of water on the first floor of my home. Called the insurance, GECO, and they were great about getting people out to help us. The claim was settled and the check issued at the end of February 2010.

Then we had to send the check to Chase Loss Draft Dept. That is where the nightmare began, and still continues, over 8 months later. The first time the claim was sent in (FEDEX) they claimed to never have received them. Then when I got proof of delivery, they claimed to only have received some of the papers that were enclosed.

I faxed everything to them a few days later. We were told that in 3 to 5 days we would have our money.

With that we start looking at kitchens, since that is where the majority of the damage happened. Mold was found in the walls that seperate the utility room from the kitchen. Everything in the kitchen had to be ripped out down to the studs in the wall.

We went to Ikea to get the kitchen. This way we could stay within our small budget. Submitted the papers to Chase and they said, again it would take another week or so to get the funds. The money never came.  Called them again. They claimed to not have the papers, AGAIN!

This kept happening over and over again. They lose EVERYTHING! Finally, in July, YES JULY, there was some repair work that had to be done by our homeowner association. The town building inspector came to see what was done, and we were told that our child could not live with us because we did not have a functioning kitchen. (we had no sink) He was going to write us up and in 30 days would have to start paying fines, also CPS would be called.  Told Chase about what they had done to us and the fines that they would have to pay…SURPRISE! Within 3 days our check showed up.

How are they allowed to operate like this?

For those of you not familiar with how this works, your insurance company issues the check in the name of you and the bank that holds your mortgage.  That is why the homeowner had to forward the check to Chase to actually get their money.

I did a little research and this type of problem with the Chase Loss Draft Department is not uncommon, all you have to do is search on “Chase Loss Draft Department.”

Did Chase employees lie to avoid getting stuck with a counterfeit bill?

This story is a little worrisome.  It’s one thing if an institution like a bank is out to cheat you through small print or policies that are heavily stacked in their favor.  But it is entirely another thing when a bank or its employees will flat-out lie to protect themselves.  In this case the evidence seems to implicate that Chase employees lied so as not to get stuck with a counterfeit bill.

In mid-August, Krier went to the credit union and withdrew five $100 bills to pay his rent. He and Day prefer to handle things in cash. A few days later – Aug. 16 – Day stopped by the Chase branch to deposit the money.

“I gave the teller the bills, and he never looked at them,” Day recalled. “He put them in the drawer and gave me a receipt.”

Day said he couldn’t remember anyone at Chase ever examining the rent money he deposited. “Never once,” he said. “They’d always just drop it right in the till.”

A few days later, though, Day received a notice from Chase informing him that one of the $100 bills was found to be counterfeit.

Day went to the branch and asked what was up. A bank worker reiterated what was in the notice and said the $100 had been deducted from his account. Day asked how they knew the bogus bill had come from him.

“I was told that a manager had seen me make the deposit,” he said. “But I don’t remember anyone else being there. In fact, I don’t know what happened after I walked out the door.”

Gary Kishner, a Chase spokesman, said that when Day made his deposit, the teller inspected each $100 bill under a black light. Nothing appeared amiss.

“After the customer left, the teller had to fill out a form for the deposit,” Kishner said. “This time, one of the bills looked a little weird. He called over a supervisor, and they held it up to the light.”

It became apparent that the bill was actually a $5 note that had been monkeyed with to look like $100. Kishner said that because the paper was genuine, the initial black-light scan hadn’t caught anything.

Now comes the really important part.

“The money was never put in the drawer,” Kishner said. “If the money had been put in the drawer, we wouldn’t have known for sure that it came from one particular customer, and we would have taken the hit. But it didn’t happen that way. It never went in the drawer.”

Day was incredulous when I relayed this to him.

“That’s an absolute and utter lie,” he responded. “It’s completely false. I saw it go into the drawer, just like they always do it.”

Kishner replied that “we have a teller and a manager who say it took place the way it did.”

Be that as it may, he later told me that Chase had reviewed its security tapes and found that they were “inconclusive” as to whether the money had actually stayed on the counter or went into the drawer.

For that reason, Kishner said, the $100 will now be returned to Day’s account.

Inconclusive?  I’d sure like to see those tapes.

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