JPMorgan settles for $400 million with Syncora over mortgage-backed securities

The bond insurer claimed Bear Stearns misrepresented the quality of the securities

When compared to a $13 billion Department of Justice (DOJ) bill or a $2.6 billion settlement for dealings with Bernie Madoff, JPMorgan Chase & Co’s latest settlement may seem like chump change. However, the company’s deal with bond insurer Syncora Guarantee Inc. shows that the bank’s legal woes related to the financial crisis aren’t over yet.

Syncora announced in a financial statement on Feb. 28 that JPMorgan will pay $400 million to lawsuits over toxic mortgage-backed securities. Syncora had brought the suits against JPMorgan to recover losses created from securities created and sold by JPMorgan-purchased Bear Stearns and Co., as well as Bear Stearns’ EMC Mortgage affiliate.

According to Reuters, Syncora claimed in its suit that Bear Stearns misrepresented the quality of the securities and tricked the bond insurer into purchasing them. The two sides had previously announced an agreement on Feb. 24 but had not released the final settlement announcement.

This settlement adds to a JPMorgan litigation bill that has shot sky high within the past six months. Along with the DOJ and Madoff settlements, JPMorgan has also recently faced a sexual discrimination suit, a suit brought by Mississippi AG Jim Hood alleging misconduct, a deal with investors over the financial crisis, and a settlement with the Commodity Future Trading Commission over the “London Whale” scandal.

With this long list of recent litigation settlements, it’s no surprise that analysts are skeptical as to whether the bank to net positive results in 2014. Without including legal expenses, analysts predict JPMorgan’s operating expenses to decline to $59 billion in 2014 from $60 billion in 2013, a negative trend at a time when the rest of the financial industry is beginning to flourish once again.

However, JPMorgan’s shareholders remain convinced that CEO Jamie Dimon is the man to lead the company past the multitude of settlements. On Jan. 23, the board agreed to increase Dimon’s compensation package for 2014.

 

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Zach Warren

Zach Warren is Assistant Editor of InsideCounsel magazine, where he oversees online content submissions and administers InsideCounsel's enewsletters. Zach specializes in new media and multimedia...

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