Boston, MA 12/19/2013 (wallstreetpr) – JPMorgan Chase & Co. (NYSE:JPM) is set to face off with Federal Deposit Insurance Corp to recover more than $1 billion involved in Washington Mutual purchase agreement.
The bank is suing FDIC for failing to honor the obligation reached at the purchase of the then troubled Washington Mutual. JPM claims that failure to honor the agreement has subjected it to massive liability in terms of financial losses and reputation damage.
It goes that at the height of the financial crisis in 2008, DFIC took Washington Mutual under receivership and then later brokered a deal with JPM for the sale of the Seattle-based mutual company. The purchase deal with DFIC involved the transfer of assets worth $1.9 billion of Washington Mutual to JPM.
In addition, DFIC was to protect the bank against any liabilities arising from the deal if it agreed to the purchase terms. So JPM agreed to the terms and the deal was sealed. However, the bank claims that DFIC has refused to acknowledge its share of the bargain especially in regards to offering protection.
As a result, JPMorgan Chase & Co. (NYSE:JPM) has been sued by the government and investors in relation to the mortgage-backed securities which came from Washington Mutual and which it sold to investors.
In a turn of events, FDIC is reported to be claiming that JPM should bear the responsibility of any liabilities regarding the acquisition of Washington Mutual.
JPMorgan Chase & Co. (NYSE:JPM) has recently found itself in awkward position follow the massive default by homeowners on high-risk mortgages. The bank has already paid billions of dollars in settlements including the historic $13 billion single civil settlement with the U.S. Justice Department.
With the increasing number of lawsuits it faces in connection to the mortgage-backed securities, the bank announced in October that it has set aside more than $9 billion to cover its legal costs.
Shares of JPMorgan Chase & Co. (NYSE:JPM) have increased in value by 27 percent year-to-date.
