Washington Mutual Sues Feds Over Firesale

Washington Mutual's holding company is suing the FDIC over its seizure and subsequent sale to JPMorgan Chase at a bargain basement $1.9 billion. The company argues that the actual value of the company was worth far more than that had the company been properly liquidated.

I tend to agree.

It isn't the first time that the government screwed up in this arena. They tried to force the sale of Wachovia to Citigroup. Wells Fargo proffered a far higher bid ($2.2 billion versus the Wells Fargo $15.1 billion) for the company and the government sought to block the acquisition and lost. Weeks later, we came to learn that Citigroup was in dire fiscal shape and needed a bailout of its own (that came with executive compensation strings attached unlike the AIG bailout that got Congressional approval and broke out the phony outrage this past week).

The government has consistently gotten the value of these companies wrong, and attempted to force transactions that would have been bad for the taxpayer. They clearly underestimated the severity of problems at Citigroup and severely undervalued the price of Wachovia.

Taken together, and one sees clear problems with further interference in the markets by the government. They are bound to make the situation worse, not better by meddling in the markets and interfering with the market valuations of these companies.