Monday, Nov. 03, 2008

Texas Loses

David Bonderman, founder of private equity shop Texas Pacific Group, knew Washington Mutual pretty well. When his firm sold a failed California thrift to the one-time Seattle giant in 1996, he got a seat on the board, which he kept until 2002. In April, TPG returned to Washington Mutual — leading a $7 billion investment to shore up the thrift's capital base. TPG put $1.3 billion of its own money on the line, fully understanding things might get worse before they got better. The terms of the deal ensured that TPG wouldn't lose out if Washington Mutual had to go out and raise more money. What Bonderman and his colleagues weren't anticipating was what happened in September. Facing a fleeing depositor base, the federal government seized the thrift, and flipped the bulk of its assets to JPMorgan Chase, wiping out existing shareholders.