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JPMorgan's Settlement in Trouble - Analyst Blog

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JPMorgan Chase & Co. ( JPM ) 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.

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 Fannie Mae ( FNMA ) and Freddie Mac ( FMCC ) 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 fresh conflict.

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 Citigroup Inc. ( C ) had also settled their cases with the FHFA earlier this year.

JPMorgan currently carries a Zacks Rank #3 (Hold).

CITIGROUP INC (C): Free Stock Analysis Report

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JPMORGAN CHASE (JPM): Free Stock Analysis Report

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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