On Aug. 28 the U.S. Federal Housing Finance Agency announced they are seeking $6 billion in reparations from JPMorgan Chase & Co. (JPM) for artificially propping up subprime mortgage-backed bonds even when they knew they were bad.
The day prior to the USFHFA's announcement, closely watched analyst Dick Bove removed his “buy” rating on JPMorgan's stock, citing the government’s “vendetta” against the banking giant. At times Bove has even speculated the government is actively trying to break up the bank. While a company that reported $26 billion in revenue last quarter will be hard to topple, the gigantic settlement claim from the USFHFA certainly bolsters Bove’s earlier claims that the government is stepping up their attempts to do just that.
While the investment giant is still posting a string of record quarterly profits, their stock remains basically stagnant. It has become increasingly clear the company can’t outpace their numerous legal troubles, many still stemming from the financial collapse that caused the Great Recession. Bove believes the bank will be shelling out, as a minimum, $2 billion in litigation fees a quarter for the foreseeable future. This will nearly cripple the company’s bottom line, and does not even account for the settlements the company has paid out, and will pay out in the future.
This summer JPMorgan has established themselves as the resident whipping boy of the financial sector. The company is still dogged by the London Whale trading fiasco, and reportedly is in talks to shell out $600 million in settlements while still admitting culpability. The bank also paid out an additional $410 milliom in settlements over an energy price fixing scandal. And the company faces an ongoing bribery investigation over the hiring of Chinese regulator’s children to gain favorable contracts.
JPMorgan is even putting their profitable commodities trading desk up for sale, in a move that suggests that the company’s regulatory woes will not be improving anytime soon.
JPMorgan's stock .14 percent to hit $50.66 a share. Despite incredibly healthy earnings in Q1 and Q2, they're only up 13.30 percent on the year.
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