JPMorgan Chase & Co.
) is in hot water again with the rise of new problems related to
its tentative multi-billion dollar settlement. The news has been
confirmed by sources familiar with the matter.
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The primary bone of contention between the banking behemoth and
the U.S. Justice department revolves around litigations related
to Washington Mutual Inc. The mortgage lender sold risky mortgage
backed securities (MBS) to
) during 2005-2007. Later in 2008, the troubled mortgage lender
was acquired by JPMorgan at the request of the Federal Reserve.
Thereafter, JPMorgan has been avoiding the litigations related to
the acquired units and expects Federal Deposit Insurance
Corporation to bear the legal expenses. The government, however,
believes that the legal liabilities belong to JPMorgan and hence
the settlement fine should be paid by the company.
JPMorgan additionally wants to resolve certain ongoing criminal
probes on Washington Mutual mortgage business pertaining to the
period before the financial crisis. This may have given birth to
The company now intends to focus on its business and regain
shareholders' confidence. However, this will be difficult if
there is any delay in the settlement, which would consequently
increase expenses and hamper earnings as well.
Last week, JPMorgan announced a settlement with the Federal
Housing Finance Agency (FHFA) related to the sale of home loans
and MBS. Though the banking major did not publicly admit any
malpractice, it has agreed to pay about $5.1 billion as
settlement. Among other banks, USB AG and
) had also settled their cases with the FHFA earlier this year.
JPMorgan currently carries a Zacks Rank #3 (Hold).