JPMorgan Chase Sues FDIC for More Than $1 Billion

JPMorgan Chase sues FDIC for more than $1 billion over Washington mutual acquisition
George Frey/Bloomberg via Getty Images
JPMorgan is suing the Federal Deposit Insurance Corp. to recover more than $1 billion tied to its purchase of Washington Mutual when that bank failed in 2008.

In a federal court complaint, the biggest U.S. bank said that the FDIC failed to honor obligations under the Washington Mutual agreement, and that has subjected JPMorgan to massive liability.

The FDIC became the receiver for Seattle-based Washington Mutual when it collapsed during the height of the financial crisis in September 2008. It was the largest bank failure in U.S. history. The FDIC brokered the sale of Washington Mutual's assets to JPMorgan for $1.9 billion.
JPMorgan said the FDIC made promises to indemnify or protect the bank against liabilities if it stepped in.

New York-based JPMorgan Chase & Co. (JPM) said in a court filing Tuesday that the FDIC later declined to acknowledge that government and investors' claims against JPMorgan for sales of Washington Mutual's risky mortgage-backed securities should have been claims against the receivership, not the bank.

Most of JPMorgan's mortgage-backed securities came from Washington Mutual and the investment bank Bear Stearns, which it also acquired in 2008.

The FDIC didn't immediately return calls seeking comment from The Associated Press early Wednesday. The FDIC has said that JPMorgan should be responsible for any liabilities regarding the Washington Mutual acquisition.

The Washington Mutual receivership's assets are about $2.75 billion, according to JPMorgan.

JPMorgan has entered into a series of legal settlements over its sales of mortgage-backed securities in the years preceding the financial crisis. As the housing market collapsed between 2006 and 2008, millions of homeowners defaulted on high-risk mortgages. That led to billions of dollars in losses for investors who bought securities created from bundles of mortgages.

Last month, the bank agreed to pay $13 billion in a civil settlement with the Justice Department and state regulators over its sales of the mortgage-linked bonds. It was the largest settlement ever between the Justice Department and a corporation.

In addition, JPMorgan reached a $4.5 billion settlement in November that covered 21 major institutional investors.

The bank said in October that it set aside $9.2 billion in the July-September quarter to cover legal costs.

Shares of JPMorgan rose 7 cents to $55.79 in trading Wednesday morning. The shares have climbed nearly 27 percent so far in 2013.

Increase your money and finance knowledge from home

Investment Strategies

What's your investing game plan?

View Course »

Basics Of The Stock Market

Stock Market 101 - everything you need to know but were afraid to ask!

View Course »

Add a Comment

*0 / 3000 Character Maximum


Filter by:

Well isn't that special...the lawsuits are flying back and forth. Maybe ole JP should have done their homework before they picked up WAMU....

December 18 2013 at 10:29 AM Report abuse +1 rate up rate down Reply
Robert & Lisa

You can't trust the Feds.

December 18 2013 at 9:02 AM Report abuse -1 rate up rate down Reply