J.P. Morgan

The SEC settled cases today with JPMorgan and Credit Suisse over “misleading investors in offerings of residential mortgage-backed securities” for a total of about $400 million, which the SEC plans to hand out to those misled investors. There’s been a lot of this sort of thing recently, so here’s a quick cheat sheet on who is suing whom over what mortgages:

  • Everyone is suing every bank over all of their mortgages.

So fine but is that not weird? Two things to notice about big banks is that they are (1) big and (2) banks, both attributes that tend to accrue lawyers. And a thing that lawyers are supposed to do is stop stupid cowboy bankers from doing stupid illegal things. If you told me that one or two banks decided to go without lawyers for cost-cutting and/or risk-increasing reasons, I would be skeptical but perhaps willing to play along, but all of them? I am certain that JPMorgan has lawyers.1

The mystery is resolved and/or deepened if you look at most of what is being settled in these cases, which in highly schematic outline was:

  • banks wanted to hose investors,
  • they asked their lawyers if that was okay,
  • the lawyers checked the documents and said “yes,”
  • so they did.

In ever so slightly less schematic outline: Read more »