Four years have passed since rising subprime mortgage delinquencies prompted the U.S. government to bailout the financial system, and regulators are still scrutinizing how banks packaged and sold home loans to investors.
On Thursday, JPMorgan Chase (NYSE:JPM) reached an agreement with the U.S. Securities and Exchange Commission, settling two investigations the regulator was conducting into the bank’s home-loan business. JPMorgan also received approval by the Federal Reserve to reinstate a $3 billion share buyback next quarter.
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“The firm has reached an agreement in principle with the staff of the SEC to resolve” some claims, JPMorgan said in the filing. “The agreement in principle is subject to approval by the SEC, as well as court approval.”
The SEC’s probe has included many major U.S banks as it investigated whether lenders failed to disclose underlying credit weaknesses. In 2010, Goldman Sachs (NYSE:GS) paid $550 million to settle SEC charges that it misled investors in a “subprime mortgage product just as the U.S. housing market was starting to collapse”. In the case of JPMorgan, the SEC focused on the mortgage-backed bonds handled by the bank and Bear Stearns, the failed investment bank that it acquired in March 2008.
“We regard this as very good news that will likely lift all money center banks today as it appears the Fed is still quite open to allowing stock repurchases,” International Strategy analyst Ed Najarian wrote in a note obtained by Bloomberg.
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