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Monday, October 28, 2013

JPMorgan: Fault and Criminal Fraud under the Settlements' Radar?


Resolving just a part of the $13 billion being demanded by the U.S. Government in court, JPMorgan capitulated in October of 2013 to a $5.1 billion settlement to resolve claims by the U.S. Federal Housing Finance Agency that the largest American bank had sold Fannie Mae and Freddie Mac mortgages and mortgage-based (i.e., derivative) securities by knowingly misrepresenting the quality of the loans and the loan-based bonds.[1]  At the time of the $5.1 billion settlement, JPMorgan’s executives were trying to settle “state and federal probes into whether the company misrepresented the quality of mortgage bonds packaged and sold at the height of the U.S. housing boom.”[2] It would seem that the bank was in a vulnerable position in the settlement negotiations, having “capitulated.” I’m not so sure.

The full essay is at "Essays on the Financial Crisis."






[1] Clea Benson and Dawn Kopecki, “JPMorgan to Pay $5.1 Billion to Settle Mortgage Claims,” Bloomberg, October 25, 2013.


[2] Ibid.


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