The U.S. government is demanding at least $6bn from JPMorgan Chase to settle lawsuits over the subprime mortgage fiasco
The U.S. government is demanding at least $6bn from JPMorgan Chase to settle lawsuits over the subprime mortgage fiasco, Reuters reports.
Citing a source who requested anonymity, Reuters reported Wednesday that the Federal Housing Finance Agency is pressing the big bank for the settlement. Chase, meanwhile, argues that it should pay less to settle the suit, which concerns bonds backed by subprime mortgages.
The FHFA sued Chase two years ago over $33bn in securities while simultaneously filing suit against at least 16 other financial institutions, Reuters reports. The lawsuits allege that the banks misrepresented how thoroughly they vetted the mortgages backing the bonds. As homeowners fell behind on their payments, the value of the securities plummeted.
The talks with Chase concern securities that include bonds sold by Bear Stearns and Washington Mutual, which Chase took over during the financial meltdown, Reuters reports.
The FHFA lawsuit is only one of many legal challenges Chase faces right now. Earlier this week, the bank was ordered to pay $42.5 million to billionaire Leonard Blavatnik in a suit over a tanked investment in mortgage-backed securities. Chase is also facing an ongoing criminal probe by the Department of Justice over its practices in the selling of mortgage-backed bonds.
Chase has spent about $5bn in legal costs in each of the last two years, Reuters reports. At the end of June, the company estimated possible losses in excess of its reserves at $6.8bn.
