JPMorgan Chase Being Federally Investigated Over Mortgages, May Face Criminal Charges

JPMorgan Chase disclosed that the U.S. Justice Department has launched an investigation to see if the bank sold shoddy mortgage securities to investors in the run-up to the financial crisis in 2008.

On Wednesday, the $2.4 trillion financial institution acknowledged for the first time the existence of the investigation in a quarterly regulatory filing.  It could be the first institution to face criminal sanctions for some of the practices that contributed to the financial meltdown, reports the NYT.

According to the Associated Press:

"The New York-based bank said in a regulatory filing that it is responding to investigations by the civil and criminal divisions of the U.S. Attorney's office for the Eastern District of California. In May, the civil division informed JPMorgan that it had "preliminarily concluded" that the bank had violated federal securities laws in connection with certain mortgage-backed investments it sold from 2005 to 2007.

...The disclosure is just the latest in a swirl of mortgage-related lawsuits and investigations that have hammered big U.S. banks in the aftermath of the financial crisis. The banks have been accused of improperly foreclosing on homeowners, discriminating against others and knowingly making loans to people who couldn't afford them. Other probes, including the one disclosed by JPMorgan, have focused on mortgage-backed securities, where the banks bundled together their mortgages and sold them in slivers to investors.

JPMorgan didn't give details on what the Justice Department is investigating. But previous lawsuits and investigations, against both JPMorgan and other big banks, have said that the banks misled investors about the quality of the loans they were buying. When the real estate bubble burst, many of the mortgage-backed securities soured and the investors who bought them lost billions."

If the investigations result in criminal or civil action against JPMorgan, the biggest bank in the US by assets, then it would be the most high-profile government move against the bank in history.