by Michael Yoakum
Impunity Watch Reporter, North America
NEW YORK CITY, New York – US investment bank JP Morgan agreed Friday to pay a $4.5 billion settlement for investors lost money as a result of mortgage-related securities during the recent financial crisis. This multibillion dollar settlement, which is separate from the $13 billion prospective settlement with the Department of Justice, would cover 330 residential mortgage backed securities.
This payout will settle claims on mortgage-backed securities issued between 2005 and 2008 by Bear Stearns, an investment bank and brokerage agency that JP Morgan acquired during the financial crisis. This settlement would not similar claims made on trusts administered by Washington Mutual, another investment bank acquired by JP Morgan during the financial crisis.
Like many Wall Street firms, JP Morgan bundled home loans into marketable securities which they offered as investments to be traded much like stocks. However, when millions of homeowners defaulted on their mortgage, the value of these securities drastically decreased in value. The owners of these securities saw the value of their investments drop to nearly nothing.
In October, JP Morgan paid a settlement for similar practices by mortgage brokers Fannie Mae and Freddie Mac totaling $5.1 billion. All tolled, JP Morgan is expected to owe nearly $20 billion in settling the array of suits brought against the trusts it acquired in the financial crisis.
Officials at JP Morgan released a statement indicating their eagerness to settle these claims. “This settlement is another important step in JPMorgan’s efforts to resolve legacy related [Residential Mortgage Backed Securities] matters,” the statement said in part.
Analysts suggest that JP Morgan is desperate to return to the good graces of Washington, which has taken measured steps to probe business practices of this financial giant. Federal investigations into JP Morgan’s tactics in collecting credit card debts and alleged manipulation of a key interest rate benchmark are just some of those measured steps.
For more information, please see:
BBC News – JP Morgan agrees $4.5bn mortgage settlement – 15 November 2013
The New York Times Dealbook – For JPMorgan, $4.5 Billion to Settle Mortgage Claims – 15 November 2013
USA Today – JPMorgan reaches tentative $4.5B settlement – 15 November 2013
The Washington Post – JPMorgan to pay $4.5 billion to settle investor claims over mortgage securities – 15 November 2013
The Wall Street Journal – J.P. Morgan Reaches $4.5 Billion Settlement With Investors – 15 November 2013
