In a quarterly regulatory filing Wednesday, the nation’s biggest bank revealed that it faces a criminal and civil investigation into “whether it sold shoddy mortgage securities to investors in the run-up to the financial crisis” between 2005 and 2007, DealB%k at The New York Times reports.
The investigation is one of several apparent mortgage-related problems brewing for the behemoth financial institution. The filing said the civil division of the United States attorney’s office for the Eastern District of California has “preliminarily concluded” that JPMorgan broke federal laws with its sale of subprime mortgage securities in the years listed. Sources close to the matter say the coinciding criminal inquiry is in a more preliminary stage.
Legal costs for the bank are reaching the hundreds of millions. The Wednesday filing showed that JPMorgan recorded $678 million in expenses for litigation services in the second quarter of 2013, up from $323 million in the same period a year ago. The bank also estimated it could incur losses of $6.8 billion beyond its reserves, nearly $1 billion more than the year’s first quarter.
—Posted by Alexander Reed Kelly.
Jessica Silver-Greenberg and Ben Protess at DealB%k:
Adding to scrutiny of the bank, federal prosecutors in Philadelphia are examining whether JPMorgan duped investors into buying troubled mortgage securities that later imploded, according to people briefed on the matter, who spoke on the condition of anonymity. The prosecutors are investigating whether JPMorgan churned out the mortgage-backed securities without ensuring that the investments met underwriting standards, the people said.
Representatives for the bank and the federal prosecutors declined to comment.
Once a darling in regulatory circles, JPMorgan has become a magnet for scrutiny in recent years, drawing attention from at least eight federal agencies, a state regulator and two European nations. The authorities are investigating the bank in connection with its financial crisis-era mortgage business and a $6 billion trading loss in London last year, among other issues.
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Jamie Dimon, chairman, president and chief executive officer of JPMorgan Chase.