Washington Mutual, FDIC agree on bankruptcy plan

Washington Mutual Inc and the Federal Deposit Insurance Corp (FDIC) have agreed to a global settlement that will return $7 billion to the bank's creditors. The move is seen as a critical step in the bankruptcy involving the biggest bank failure in US history.

According to FDIC, the agreement would help settle claims between the bankrupt lender's holding company and JP Morgan Chase, which acquired the failed bank.

The involvement of the FDIC is on account of its appointment as receiver of  Washington Mutual in September 2008, at the height of the financial crisis.

The deal follows the rejection of a settlement proposed earlier.

The bank's holding company has been trying to work its way out of 18 months of legal entanglement so as to begin repayment to creditors.

The bone of contention among the three parties has been deposits Washington Mutual has at its seized bank and over billions of dollars in tax refunds.