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A New, Huge Potential Fine for JPMorgan Chase's Bubble Crimes
September 24, 2013 • 6:42PM

The $950 million fine JPMorgan Chase has just agreed to with the SEC, for securities frauds in which it has admitted wrongdoing by employees (the massive "London Whale" derivatives fraud), may be dwarfed by another penalty to hit the bank, according to a New York Times report today.

Morgan committed mortgage securities fraud crimes on a greater scale than any other U.S.-based bank; and a long-running investigation led by New York Attorney General Eric Schneiderman may now be about to spawn Justice Department charges and a huge financial penalty against the bank. The mortgage activity underlying the securities fraud was primarily in California cities devastated by the meltdown of 2007-08; however, Morgan is also being investigated for potentially criminal electricity price fixing and looting in California.

The Times' sources reported the following: "Underscoring the breadth of the scrutiny, the people said, JPMorgan and the Department of Housing and Urban Development briefly discussed the possibility of striking a wide-ranging settlement to conclude many of the looming mortgage investigations from Federal authorities and state attorneys general. But the housing agency floated a price tag of about $20 billion for the settlement, the people said, effectively derailing settlement talks with JPMorgan lawyers, who were stunned by the size of the proposed penalty."

Such a penalty would completely wipe out Morgan's loan-loss reserves (which it has been using to report profits quarter by quarter) and its litigation-loss reserves, and put the bank in serious trouble.


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