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."
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.
[