Will Bank Of America Corporation (NYSE:BAC) Follow JPMorgan Chase & Co. (NYSE:JPM)
New York Times has reported on October 19, that a potential settlement agreement between the $204 billion market capitalized JPMorgan Chase & Co. (NYSE:JPM) and United States Justice Department could be in the works. Based on the sketchy details gathered from unnamed sources who are privy to the Justice department and JP Morgan settlement discussions, NT Times has reported that the banking giant has in principal agreed to shell out close to $13 billion in fines. The bank hopes that this penalty will settle civil claims which had originated from its selling of low grade mortgage backed securities. The settlement does not provide any relief from future criminal proceedings being taken up against individual bank employees who caused great loss to investing public.
The justice department had filed law suits against the bank alleging civil liability for failing to disclose the risks associated with investing in caustic mortgage bonds that it had enthusiastically hawked in the run up to 2007 financial crisis. Readers might recall that the indiscriminate promotion of unviable and risky mortgage backed securities by financial institutions was one of the primary reasons for the global financial meltdown in 2007/08 timeframe.
If the said deal does come through, it would not be the first time that JP Morgan would be levelling with authorities and shelling out fines in order to put its sordid financial dealings which bordered on unethical practices behind. In early September it had agreed to pay out close to $1 billion as fines to authorities in U.K when its top executives were found guilty of indulging in wrong banking practices. That debacle was known as the “London Whale” trading fiasco.
This deal could layout a settlement template for other big financial institutions which are being pursued by federal authorities. In a case which is very similar to JP Morgan, the US government had initiated legal proceedings against Bank of America Corporation (NYSE:BAC) in August this year. The charges include wilful non disclosure of risks associated with investments going into its mortgage backed securities. The bank is being sued for both civil and criminal liabilities for the above charges.