Econintersect: The giant Wall Street bank is opening it’s coffers again, this time for $6 billion to settle with institutional investors who claim they were defrauded by MBS (mortgage backed securities) sold to them by JP Morgan Chase (NYSE:JPM). The deal is not finalized as this is written but the Financial Times says that the settlement is “nearing” agreement. But the same FT article reports that one person involved indicated that agreemnt was “not imminent“. The amount is also subject to change, according to the FT source.
The securities in question were inherited by JPM through its acquisitions of failing firms Bear Stearns and Washington Mutual during the financial crisis in 2008.
A similar settlement was agreed to earlier (in 2011) by Bank of America (NYSE:BAC) for $8.5 billion. That judgement is still under appeal by investors who claim it is by far insufficient.
According to the Financial Times the group of 22 investors filing the compplaint include some giants including BlackRock Inc. (NYSE:BLK) and Goldman Sachs (NYSE:GS).
If this $6 billion is the figure for this case then that will bring the pay-offs for JP Morgan’s indiscretions (frauds) to more than $23 billion. In addition the firm lost about $6 billion in 2012 on an errant trading operation known as the “London Whale” trade.
If this continues these “small” penalties may eventually add up to real money. But whatever the final total it will be far short of a significant offset against the trillions in losses suffered by the public during the Great Financial Crisis.
- JPMorgan nears $6bn settlement with investors (Stephen Foley, Tom Braithwaite and Kara Scannell, Financial Times, 22 October 2013)
- Major JPMorgan Chase settlements and fines (Kevin McCoy, USA Today, 19 October 2013)
- JP Morgan: 13 is an Unlucky Number (GEI News, 20 October 2013)