JPMorgan: under siege Legal and regulatory challenges mount The bank that has boasted of a fortress balance sheet is under siege by litigation and regulation. With each day in the August doldrums, a new problem seemed to arise. Each new probe or lawsuit is worse than the one before it because it makes them all look less like anomalies and more like symptoms of an underlying problem, or like evidence that the bank is too big to manage: JPMorgan is facing a criminal investigation over whether it manipulated US energy markets. There is a criminal inquiry into mortgage practices ahead of the crisis, too. And now a probe about hiring practices in China (children of government officials) questioning if the bank violated bribery laws. It also received a subpoena as part of an inquiry into metals warehousing. And the latest dwarfs it all: US authorities are demanding JPMorgan Chase pay more than $6bn to settle allegations it mis-sold securities to government-backed mortgage companies in the run-up to the financial crisis The Federal Housing Finance Agency (FHFA) , a government regulator, sued JPMorgan and 17 other banks in 2011. It said the bank falsely claimed that loans backing $33bn of mortgage-backed securities complied with underwriting guidelines and that it “significantly overstated the ability of the borrowers to repay their mortgage loans”. JPMorgan chief Jamie Dimon himself warned of heightened scrutiny after the “London Whale” debacle. Derivatives trading at the chief investment office backfired, producing not just $6bn in losses last year, but also allegations that the bank misled regulators and investors, setting off broader concerns. The actual legal costs are just one aspect. JPMorgan has set aside billions of reserves since the crisis. It has further estimated that the legal losses could exceed its reserves by up to $6.8bn. That is no small amount, but keep it in context: net profit in 2012 topped $20bn, even with the Whale losses. source: FT And was is the funny part of this FHFA is run by that horrible Bush lackey Ed DeMarco, who may extract more from JPM than any other entity in the federal government. He must have not gotten the Obama memo to go lite on the banks - esp. on Jamie Dimon/JPM
Posted on: Wed, 28 Aug 2013 13:34:09 +0000
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