JPMorgan strikes back, sues FDIC
After agreeing to a $13 billion settlement with the government to resolve allegations that it had sold faulty mortgage securities, JPMorgan Chase struck back and filed a case against the Federal Deposit Insurance Corporation, the Financial Times reported. In its lawsuit, JPMorgan said it was trying to get back over a billion dollars from the FDIC which had overseen the receivership of Washington Mutual or WaMu. The bank had failed during the financial crisis and then divested most of its assets to JPMorgan.
The report said WaMu had packaged bad mortgages worth billions of dollars into securities which it sold to institutional investors before the financial crisis. JPMorgan got the brunt of WaMu's mis-selling after it faced allegations of fraud from the government, the issue which it later settled as part of the $13 billion deal it made with the Department of Justice and other agencies weeks ago.
Although the FDIC still has not issued a comment on the case, the report cited sources which said that FDIC officials believe that JPMorgan took on the legal liabilities of WaMu upon acquisition and as a result, it does not have a claim on the assets amounting to $2.7 billion that are still in receivership.
Filed in a Washington district court, JPMorgan alleged that the agency "wrongly refused to acknowledge or honour its expansive indemnification obligations." It added that those obligations were found in the agreement between FDIC and JPMorgan which "protected the FDIC from potentially unprecedented liability and helped ensure the stability of the country's banking system by enabling the former [Washington Mutual] branches to remain open for business as usual following the failure."
JPMorgan claimed that it should not be responsible for the lawsuits that were filed against it as a result of WaMu's actions, including the claim that it misrepresented the loans securitized, the report said.