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JPMorgan, Credit Suisse Pay $400 Million in Mortgage Case

Matt Twomey
Friday, 16 Nov 2012 | 4:08 PM ET

JPMorgan and Credit Suisse greed Friday to pay more than $400 million to settle federal civil charges that they misled nvestors over mortgage-backed securities they knew could fail, the Securities and Exchange Commission said.

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The SEC alleges that JPMorgan didn't disclose the quality of mortgage loans tied to securities underwritten by the banking giant.

Investors sustained losses of at least $37 million on undisclosed delinquent loans.

SEC enforcement chief Robert Khuzami said it was these kinds of dubious financial products that brought on the 2008 meltdown. "In many ways, mortgage products such as RMBS were ground zero in the financial crisis," he said.

JPMorgan also is charged for Bear Stearns' failure to disclose taking cash settlements from mortgage loan originators on problem loans that Bear Stearns had sold into mortgage-backed security trusts.

Bear Stearns, which JPMorgan purchased amid the 2008 financial crisis, made at least $137.8 million through the practice.

Credit Suisse was charged with similar conduct, by which the bank made $55.7 million.

JPMorgan has agreed to pay $296.9 million to settle the SEC's charges, while Credit Suisse has agreed to pay $120 million.

The SEC said it plans to distribute the money to harmed investors.

Both firms agreed to settle without admitting or denying the charges.

This wasn't the first such settlement between the SEC and Wall Street. Goldman Sachs agreed in 2010 to pay $550 million to settle SEC charges that it misled investors in a complex mortgage bond transaction.

The SEC says it has filed actions related to the financial crisis against 129 defendants, nearly half of whom were CEOs, CFOs and other senior executives, resulting in about $2.6 billion in penalties and other monetary relief.

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