August 8, 2013
The biggest US bank is under investigation by the country’s Department of Justice over whether it knowingly sold shoddy mortgage bonds prior to the financial crisis and is in violation of securities laws.
JPMorgan Chase announced Wednesday in a quarterly regulatory filing it is under criminal and civil investigation. The bank “continues to respond to other MBS [mortgage-backed security] related regulatory inquiries,” the filing said.
The US’s largest bank is responding to the ‘parallel investigations’ by both the US Attorney’s Office and the Eastern District of California for overstating the quality of mortgages they sold to investors between 2005 and 2007, Reuters reports.
Neither the bank nor the federal branch have provided comment on the case.
The US is investigating JPMorgan under the Financial Institutions Reform, Recovery and Enforcement Act, according to Bloomberg.
Last October, New York attorney general Eric. T. Schneiderman accused the bank of selling securities that caused roughly $22.5 billion in investor loss.
President Obama’s federal mortgage task force has aggressively been going after banks and financial institutions to hold them accountable for any wrongdoing in the subprime mortgage boom and the subsequent burst which brought the American economy crashing down and into recession.
JPMorgan is one of 18 banks under accused of selling bad loans to Fannie Mae and Freddie Mac without fully disclosing risks.
The New York-based bank has faced a slew of law suits which span from energy pricing fraud to Libor rate scandal retributions.
Losses in 2013 could amount to $6.8 billion beyond its reserves, according to the bank’s internal estimates.
Bank of America was accused of, and contested, fraud allegations on Tuesday connected with single mortgage-backed securities.
The US Justice Department and the Securities Exchange Commission (SEC) have investigated Bank of America for allegedly defrauding their investors of $850 million in securities. The bank has refuted the charges and has said their buyers had sufficient data and knowledge before purchasing the ‘bad loans’.