JPMorgan pays $153m fine in home loan probe
JPMorgan Chase agreed to pay $153.6m to settle US regulatory claims it misled pension funds and a Lutheran group while selling a product linked to risky mortgages as the housing market unravelled.
The company, the only major Wall Street bank to remain profitable throughout the financial crisis, didn't tell investors that hedge fund Magnetar Capital helped pick assets linked to a synthetic collateralised debt obligation in 2007, the Securities and Exchange Commission wrote in a fraud case filed yesterday at Manhattan federal court.
Magnetar, betting housing prices would fall, stood to profit if assets defaulted.
"JPMorgan marketed highly complex CDO investments to investors with promises that the mortgage assets underlying the CDO would be selected by an independent manager looking out for investor interests," the SEC's enforcement chief, Robert Khuzami, said in a statement. "With the settlement, harmed investors receive a full return of the losses they suffered."
The SEC is targeting mortgage-industry firms from loan originators such as Countrywide Financial to underwriters including Goldman Sachs which paid a record $550m for failing to inform clients in 2007 that it let a hedge fund, also betting against the housing market, to help put together a CDO.
Like Goldman, JPMorgan's brokerage unit, JPMorgan Securities, didn't admit or deny wrongdoing in settling. The accord is subject to court approval.
"The SEC has not charged the firm with intentional or reckless misconduct," JPMorgan said in a statement. (Bloomberg)