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JPMorgan Being Investigated Over MBS
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JPMorgan Chase &Co, the largest bank by assets, is being criminally investigated by the U.S. Department of Justice over its mortgage-backed securities. The mortgage backed securities were securitized loans on mortgages using the equity value as collateral. The primary issue is that different risk and credit tranches were bundled together; triple A alongside triple B and C. So long as the assets retained their value, things would be on the up and up, and high risk would be followed by a high return. In a bubble environment, no one foresaw that the homes would lose their value. All of a sudden many portfolio managers were holding these assets that became worthless and several places became bankrupt as a result, like Solomon brothers, or Wachovia. Many people foreclosed as their mortgages were costlier than their homes.

The civil division of the U.S. Department of Justice notified JPMorgan that the bank had “violated federal securities laws in offerings of subprime and Alt-A residential mortgage securities,” according to the Huffington Post. In this quarters report, JPMorgan made the disclosures with the SEC. The estimate of legal losses of the bank is in excess of $6.8 billion. This investigation follows President Obama’s announcement that companies who broke the law and financed the housing bubble that caused the great recession and financial crisis would be punished.




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