You are hereWall St.Journal: J.P. Morgan to Pay $153.6 Million to Settle SEC Charges

Wall St.Journal: J.P. Morgan to Pay $153.6 Million to Settle SEC Charges

-By Shira Ovide

June 21, 2011- The SEC said J.P. Morgan Securities will pay $153.6 million to settle charges that the firm misled investors in a mortgage-backed securities transaction “just as the housing market was starting to plummet.”

In shades of the SEC lawsuit last year against Goldman Sachs, the SEC in a news release said J.P. Morgan set up a $1.1 billion collateralized debt obligation without properly telling investors that a hedge fund helped select assets packed into the CDO, and had bet against more than half those assets.

Click HERE to read the SEC lawsuit against J.P Morgan.

The company neither admitted nor denied the SEC allegations. J.P Morgan agreed to improve how it reviews and approves mortgage-bond deals.

(Reminder: CDOs are complicated financial securities build around pools of mortgages and other loans. The pools were then sold in slices to investors. Some of the slices considered “safe” turned out to be anything but when the home loans inside the CDOs went south.)

The Wall Street Journal previously reported that the SEC was in talks to settle fraud allegations related to the J.P. Morgan mortgage-bond deal, called “Squared CDO 2007-1.” Hedge fund Magnetar Capital played a “significant role” in selecting CDOs for the transaction, and had a $600 million short position, meaning the firm bet on losses in those same CDOs, the SEC says. 



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