Time isn’t the only thing that can heal wounds. In the wake of the late-2000s crisis, the world’s largest banks have been using money — gobs and gobs of money — to heal the damage they helped cause. At the end of August, Bloomberg calculated that the six biggest U.S. banks alone had paid more than $103 billion in legal costs since 2008, with the majority — 75 percent — split between just two banks: Bank of America (NYSE:BAC) and JPMorgan Chase (NYSE:JPM).
Bank of America has spent $20.1 billion on legal fees and litigation expenses so far, with $36 billion more set aside for possible future damages. Nearly a quarter of Bank of America’s war chest could be put to use shortly with an $8.5 billion settlement related to the sale of mortgage bonds before the financial crisis expected to finally exit legal limbo in the near future.
JPMorgan has put away $21.8 billion for legal fees since 2008 and recently set aside $8.1 billion to buyback mortgages. Alongside the fallout from its London Whale Loss of more than $6 billion, JPMorgan is also facing a record settlement with the Department of Justice that could come in as high as $13 billion. To round it all out, JPMorgan recently announced that it will settle with investors for $4.5 billion over the sale of mortgage-backed securities between 2005 and 2008. The securities were sold by Bear Stearns, JPMorgan, and Chase Bank before they merged into the giant we know and love today.
Although the bank has been making an enormous effort to clear its docket, the full array of issues facing JPMorgan is still diverse and massive, and the $4.5 billion settlement will come in on top of everything else that is on the table. JPMorgan is still expected to face charges related to mortgage deals made by Washington Mutual before it was acquired, and there is, of course, the $13 billion DoJ case hanging over the bank’s head.
Last month, JPMorgan disclosed it had set aside $23 billion in reserves for different litigation fees. In the statement announcing the November 15 settlement, the bank seemed confident it had prudently reserved its money to pay these extravagant costs without disrupting the flow of business. “This settlement is another important step in J.P. Morgan’s efforts to resolve legacy related RMBS matters,” the statement read. “The firm believes it is appropriately reserved for this and any remaining RMBS litigation matters.”
There is also an issue regarding the bank’s hiring practices in China that may or may not manifest into something more tangible. JPMorgan is reportedly under investigation for a possible breach of the Foreign Corrupt Practices Act.
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