BBC News, 19
November 2013
 |
| The settlement is the largest ever between a corporation and the US government |
Related
Stories
US bank JP Morgan has agreed to a record $13bn (£8bn) settlement with US regulators for misleading investors during the housing crisis.
It is the
largest settlement ever between the US government and a corporation.
About $4bn
of the settlement is to go to homeowners hurt by JP Morgan's practices.
As part of
the settlement, the bank acknowledged it made "serious misrepresentations
to the public".
"The
conduct uncovered in this investigation helped sow the seeds of the mortgage
meltdown," said Attorney General Eric Holder in a statement.
After the
relief given to homeowners, $9bn will be paid to settle federal and state civil
claims relating to misleading mortgage securities sold by the bank.
Some of
that will be given to investors who lost money.
Faulty
mortgages
JP Morgan
has worked hard to put the mortgage crisis of 2006-2007 behind it.
The bank
has been under investigation for selling low-quality mortgage-backed securities
to investors who were unaware that the securities often contained faulty
mortgages.
 |
| New York Attorney Eric Schneiderman tweeted a picture of him signing the agreement |
A large
portion of the mortgages under investigation by authorities were bought by JP
Morgan when it acquired banks Bear Stearns and Washington Mutual at the height
of the financial crisis of 2008-2009.
It is hoped
that this fine will settle all of the civil penalties arising from those faulty
sales, although criminal charges could still remain.
Sharp fall
The fine
represents a sharp fall for JP Morgan, known for its "fortress balance
sheet" and traditionally sterling reputation on Wall Street.
Boss Jamie
Dimon was also a favourite with politicians in Washington, and seemed to help
steer the bank through the worst of the financial crisis and its aftermath.
But that
all seems to have changed in recent months.
This record
fine follows an announcement a few weeks ago that a separate regulator, the
Federal Housing and Finance Authority, had reached a $5.1bn settlement with the
bank.
Last month,
the bank agreed to pay more than $1bn to help it end various investigations
into its 2012 "London whale" trading debacle, which cost the bank
more than $6bn and raised questions about its oversight procedures.
The firm
also reported a rare loss last quarter, having set aside an additional $9bn to
help it deal with its mounting legal troubles.
In total,
JP Morgan has had to set aside a total of $23bn to help it work through its
many investigations by regulators in the US and abroad.
Worst
behind them
Nonetheless,
investors seem to continue to think that the bank will emerge relatively
unscathed from the fines.
"The
share price is bumping up against a ten year high," Duff McDonald, author
of a book on JP Morgan, told the BBC.
"While
no one likes a fine especially of this magnitude, I think shareholders are
responding positively to it because it's resolving some uncertainty around the
company."
While the
settlement with the US Justice Department does mean that the bank has put the
worst of its expected fines behind it, nonetheless, there are still nine
ongoing investigations by regulators into practices at the bank.
These investigations include that bank's hiring practices in China as well as accusations that bankers at JP Morgan manipulated the Libor benchmark interest rate.
These investigations include that bank's hiring practices in China as well as accusations that bankers at JP Morgan manipulated the Libor benchmark interest rate.
Related Article:
No comments:
Post a Comment
Note: Only a member of this blog may post a comment.