Washington Mutual Inc., JPMorgan Chase & Co. and federal regulators announced Friday that they have settled disputes arising out of the largest banking collapse in U.S. history, Washington Mutual Bank.

Brian Rosen, an attorney for the bank's former parent, announced the deal at a hearing in the U.S. Bankruptcy Court in Wilmington, Del.

JPMorgan Chase agreed to relinquish $4 billion that was in Washington Mutual Bank's accounts when it was seized and sold. In return, JPMorgan Chase, which bought the bank, gets a share of tax refunds, other assets worth billions and a shield from allegations of impropriety that have dogged it over the 2008 purchase of the ailing thrift.

As the bank's buyer, JPMorgan Chase has been clinging to the bank account cash while battling allegations it engineered the bank's collapse in order to take it over at a bargain price.

The deal announced Friday gets JPMorgan Chase largely off the hook for a series of lawsuits, as Washington Mutual Inc., JPMorgan Chase and regulators agreed to drop legal actions they have filed against each other. The settlement also allows JPMorgan Chase to collect a share of tax refunds due once the thrift's losses are counted against previous years of profits.

Rosen said JPMorgan Chase will get 70% of what is expected to be an initial $3 billion tax refund. Washington Mutual Inc. will get the remaining 30%.

A second tax refund, which could be as much as $2.6 billion, will be divided between Washington Mutual Inc. and the Federal Deposit Insurance Corp. The FDIC will get 59.6% of the second tax refund and Washington Mutual Inc. will get the rest.

The FDIC is in charge of finding money for the failed bank's creditors in a receivership proceeding that is separate from the parent company's bankruptcy case. If bondholders who backed Washington Mutual Bank do not go along with the deal, and continue to press their claims for payment in the parent company's bankruptcy, the settlement is off, Rosen said.

Two groups of Washington Mutual Bank bondholders have filed claims in the parent company's bankruptcy case, as has the FDIC, acting as receiver for the bank's creditors. They say the bank paid years of dividends to Washington Mutual Inc., only to be abandoned by the parent company at the height of anxiety about the steadiness of the U.S. financial system.

The settlement gives JPMorgan Chase two other hotly contested assets: pension plan assets with an estimated value of $2 billion and trust-preferred securities.

Washington Mutual Inc. also agreed to sell its Visa stake to JPMorgan Chase for $50 million.

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