Other crisis-era deals also continue to haunt the bank. JPMorgan still faces a lawsuit brought by the Federal Housing Finance Agency over mortgage securities sold by Bear Stearns and Washington Mutual, which the bank also snapped up during the downturn. The securities in contention were bought by the mortgage finance companies Fannie Mae and Freddie Mac, which the FHFA overseas.
The Justice Department probe of JPMorgan is part of a larger government effort to hold banks accountable for haphazard packaging and selling of mortgage bonds that nearly toppled the economy.
Investigations, however, have ramped up under the Obama administration’s federal mortgage task force — a team of federal and state attorneys assembled in 2009 to go after crimes related to the financial crisis.
In January 2012, the task force launched a working group to investigate misconduct in the mortgage-backed-securities market. Since then, the group, led by New York’s Schneiderman, has filed cases against Credit Suisse and Bank of America for allegedly misleading investors about the quality of the securities they sold.
Other federal agencies are also ratcheting up cases against Wall Street titans over faulty securities. On Monday, the National Credit Union Administration filed nine lawsuits in federal court in Manhattan over the sale of nearly $2.4 billion in mortgage securities to Southwest and Members United credit unions. The suits allege that Credit Suisse, Barclays, JPMorgan and others sold the financial cooperatives troubled loans that led to their demise.
It remains unclear whether these lawsuits and others that are expected to follow will quell criticism of the government’s effort to hold Wall Street accountable for its actions during the financial crisis. Industry experts and others following these cases have criticized the lack of criminal prosecutions of high-ranking executives. Others saymultimillion-dollar settlements could go a long way in preventing future wrongdoing.
Even if JPMorgan resolves many of its outstanding cases with the Justice Department, it will still have to contend with federal probes into its debt-collection practices and its role in the manipulation of a benchmark measure tied to interest-rate swaps.