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JPMorgan Under Criminal and Civil Investigation Over Mortgages

One of Wall Street’s Too Big To Fail banks is under criminal investigation for its practices in the mortgage market.  JPMorgan Chase & Co. disclosed in a SEC filing that it was under criminal investigation and had already been notified by the Department of Justice’s civil division that it had violated federal securities laws in offerings of subprime and Alt-A residential mortgage securities during 2005 to 2007.

JPMorgan Chase & Co. (JPM), the biggest U.S. bank, said it’s under federal criminal investigation for practices tied to sales of mortgage-backed bonds that the Justice Department has already concluded broke civil laws.

The department’s civil division told the bank in May of its preliminary finding after examining securities tied to subprime and Alt-A loans, which were sold to investors from 2005 through 2007, JPMorgan said yesterday. The office of U.S. Attorney Benjamin Wagner in Sacramento, California, has been conducting civil and criminal inquiries, the bank said.

In terms of civil penalties for fraud in the mortgage market JPMorgan would be joining its Too Big To Fail colleagues as Citigroup, Goldman Sachs, and recently Bank of America have faced fines. But a criminal indictment would set JPMorgan apart. Though given Attorney General Eric Holder’s public statements on companies like JPMorgan being Too Big To Jail, it seems unlikely a criminal charge would ever actually be filed.

Federal prosecutors are reluctant to bring criminal charges against a large bank that’s tightly interconnected with other firms because it could endanger national or global economies, U.S. Attorney General Eric Holder told a Senate Judiciary Committee hearing in March

“It has an inhibiting impact on our ability to bring resolutions that I think would be more appropriate,” he told lawmakers.

Whether JPMorgan is too big to prosecute for criminal violations will be known soon enough, but it doesn’t look good.

At least with the fines paid by Wall Street’s biggest banks one thing has been resolutely demonstrated – Wall Street, not poor people, was behind the 2008 crash. It wasn’t chance, it was the consequence of deregulation and reckless criminal conduct. Case closed.

Photo by JSquish under Creative Commons license

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Dan Wright

Dan Wright

Daniel Wright is a longtime blogger and currently writes for Shadowproof. He lives in New Jersey, by choice.