WaMu, FDIC should end bankruptcy dispute by May 21

Washington Mutual Inc. and the Federal Deposit Insurance Corp. should end their dispute over the biggest U.S. bank failure by May 21, lawyers for both groups told a bankruptcy judge today.

The settlement agreement "should be completed by the end of this week," FDIC attorney Thomas Califano said in an interview after the hearing. Earlier, Califano told U.S. Bankruptcy Judge Mary F. Walrath in Wilmington, Delaware, that the FDIC would have enough time to review and approve the proposed settlement.

Under the terms of the agreement, the FDIC would get as much as $850 million of tax refunds worth as much as $5.8 billion, according to court documents. WaMu and the FDIC would also end their court battles over the 2008 takeover of WaMu's bank by federal regulators.

The company, its bondholders and the official committee of unsecured creditors support the proposed settlement that would split the tax refunds and other assets with JPMorgan Chase & Co. and the FDIC, which both claimed they were owed money by WaMu.

WaMu, its bondholders and other creditors have considered using lawsuits to recover money to pay about $7 billion in debt, mostly to bondholders.

Shareholders would get nothing under a proposed liquidation of most of the company's remaining assets, which include $4 billion in cash in addition to the tax refunds.

The bankruptcy case is In re Washington Mutual Inc., 08- 12229, and a related financial dispute is Washington Mutual Inc. v. JPMorgan Chase Bank NA, 09-50934, U.S. Bankruptcy Court, District of Delaware (Wilmington).