As goes Goldman, goes the nation:
JP Morgan Chase has agreed to pay $153 million to settle allegations that it misled investors when it created and marketed a risky mortgage investment shortly before the housing market collapsed. The Securities and Exchange Commission accused JP Morgan of securities fraud, saying the bank failed to tell investors that a hedge fund helped create the investment while betting that it would fail. Investors who lost more than $100 million on the deal included a religious non-profit group in Minneapolis, several Asian financial institutions and General Motors Asset Management, which manages the General Motors pension plans. The accusations closely mirror the S.E.C.’s 2010 case against Goldman Sachs, which was accused of selling a mortgage investment that was intended to collapse. In that case, Hedge fund giant John Paulson had helped create — and bet against — the Abacus mortgage investment sold by Goldman.
The SEC seems to be picking the low-hanging fruit, so to speak, going after instances during the lead-up to the financial crisis where big banks and financial institutions left clear traces of malice with respect to their investors. As is typical in these cases, the firm “neither admitted nor denied wrongdoing in the settlement.” [The New York Times]
