Bringing in great relief for
JPMorgan Chase & Co
), the U.S. District Judge dismissed a major portion of the
lawsuit filed by Brussels based bank Dexia N.V. /S.A. The lawsuit
accused JPMorgan of deliberately selling perilous mortgage backed
securities worth $1.6 billion to Dexia during the housing boom
prior to the 2008 financial meltdown.
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Judge Jed Rakoff allowed Dexia to proceed with only 5 claims
while dismissing nearly 60 claims. This will significantly slash
the potential legal settlement to $5.7 million from $774 million.
The judge is yet to elucidate his rationale on quashing the
In 2012, the French-Belgian bank Dexia dragged JPMorgan to court
along with its affiliates - The Bear Stearns Companies, Inc and
Washington Mutual, Inc. As per the subsidiary of Dexia - FSA
Asset Management LLC - the defendants had a clear idea of the
risks associated with the mortgage securities. However, JPMorgan
sold massive quantities of these securities to Dexia to reduce
its own exposure.
The Dexia lawsuit attracted immense media glare after a series of
emails were discovered, which suggested that the bank despite
being aware of the associated risks, sold massive quantities of
The dismissal comes as a major triumph for JPMorgan. The company
has been deluged by a series of lawsuits stemming from the sale
of the mortgage securities prior to the last financial crisis. In
addition, the company faces a plethora of other lawsuits alleging
legal malfeasance. Last month, Freddie Mac dragged JPMorgan and a
dozen other banks including biggies like
Bank of America Corporation
Credit Suisse Group AG
) to court accusing them of manipulating the London Interbank
Offered Rate (LIBOR).
Over the last couple of years, JPMorgan has been shelling out
millions to settle litigations. In Nov 2012, the company paid
$296.9 million to settle claims by the Securities and Exchange
Commission over similar charges. The legal settlements have
become a headache as they erode a considerable portion of the
profits. However, JPMorgan's strong fundamentals continue to act
as a positive catalyst.
JPMorgan currently carries a Zacks Rank #2 (Buy)