BBC News, 19
October 2013
 |
| JP Morgan has recently found itself overwhelmed by mounting legal troubles |
Related
Stories
US banking
giant JP Morgan is set for a record $13bn (£8bn) fine to settle investigations
into its mortgage-backed securities, US media reports say.
A tentative
deal is believed to have been reached in talks with senior US justice
department officials.
The sale of
overvalued mortgage-backed securities was blamed for the near-collapse of the
banking system in 2007.
Last month,
JP Morgan was fined almost $1bn in a separate case over the "London
Whale" trading debacle.
The scandal
arose from disastrous trades by former bank employee Bruno Iksil, who made big
bets on the financial markets.
Risky
assets
The
tentative deal to pay the $13bn fine to the justice department was reached
during the talks on Friday, between JP Morgan lawyers with US Attorney General
Eric Holder and his deputy Tony West, the Wall Street Journal said, citing
officials familiar with the decision.
The New
York Times also reported that the investment bank was nearing the agreement,
although final details are still being discussed.
Neither the
justice department nor the bank was available for comment.
If
confirmed, it would be the biggest settlement of its kind ever paid by an
American company.
The $13bn
sum is said to include $9bn in fines and a further $4bn in relief for
struggling homeowners.
In the
run-up to the financial crisis, sophisticated financial products known as
mortgage-backed securities were created by many investment banks.
These
special bonds contained a mix of investments but at their heart were supposed
to be risk-free home loans, the BBC's business correspondent Joe Lynam reports.
What JP
Morgan is alleged to have done was sell the mortgage-backed assets knowing full
well that many of the home loans were in fact very risky.
Some of the
problems relate to mortgage bank Washington Mutual and investment bank Bear
Stearns, two failing firms that JPMorgan took over in 2008.
The
mortgage-backed assets are widely thought to have played a central role in the
near collapse of the banking system when banks realised in 2007 that many of
their assets were worth a fraction of their official book value.
The fine
would settle all potential civil action that might be taken against the bank in
future but does not mean that criminal cases against individuals are ruled out,
our correspondent adds.
JP Morgan
had initially aimed to persuade US justice department officials to drop the
criminal investigation but the attorney general ruled that out, reports said.
In August,
US government officials filed two lawsuits against Bank of America relating to
mortgage-backed securities. Bank of America denied civil fraud in failing to
disclose risks and misleading investors.
Legal woes
JP Morgan
has found itself overwhelmed by mounting legal troubles lately.
Once the
darling of Washington and Wall Street, it reported a rare quarterly earnings
loss last week, mostly due to legal costs totalling $9.2bn.
The bank
lost $380m during the quarter, compared with a profit of $5.7bn in the same
period last year.
JP Morgan
says it has set aside a fund of $23bn to deal with mounting legal costs.
Related Article:
No comments:
Post a Comment
Note: Only a member of this blog may post a comment.