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Originally published October 4, 2008 at 12:00 AM | Page modified October 4, 2008 at 12:18 AM

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Wamu holding company, JPMorgan fight over $5B in cash

Washington Mutual Inc., the bankrupt holding company of the biggest U.S. bank to fail, and JPMorgan Chase, the bank's new owner, agreed...

Bloomberg News

Washington Mutual Inc., the bankrupt holding company of the biggest U.S. bank to fail, and JPMorgan Chase, the bank's new owner, agreed to delay any attempt to withdraw a disputed $5 billion in cash from the institution.

WaMu attorney Marcia Goldstein told U.S. Bankruptcy Judge Mary Walrath in Wilmington, Del., Friday that her client owns the money.

Goldstein said both parties would give two days' notice before trying to access the funds, allowing time for them to formally ask Walrath to intervene in the dispute.

"There was a fair amount chaos, frankly, Thursday evening," Goldstein said, referring to Sept. 25, the day before WaMu's bankruptcy filing. "We are trying to work with JPMorgan to resolve any remaining confusion."

The holding company sought court protection after its banking subsidiaries, including Washington Mutual Bank, were seized by U.S. government regulators and sold to New York-based JPMorgan for $1.9 billion.

The $5 billion in cash is being held by Washington Mutual Bank, which isn't in bankruptcy. Banks are barred by federal law from seeking bankruptcy-court protection.

Lawyers for WaMu bondholders and its former bank have said they may lay claim to the cash.

Bondholders may challenge WaMu's claim to the cash, said attorney Evan Flaschen of the Austin, Texas-based law firm Bracewell & Giuliani. Bracewell has been hired by bondholders who are owed money by Washington Mutual Bank.

The bondholders want to know why WaMu, if it controls the $5 billion, didn't use the funds to support its operations in the days before regulators took over, Flaschen said.

"There is going to be a battle royal over whether the bank is entitled to have access to that cash," said distressed-debt analyst Matthew Dundon of Miller Tabak Roberts Securities in New York.

Copyright © 2008 The Seattle Times Company

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