JP Morgan Chase and Credit Suisse are paying a combined $417M to settle federal civil charges that they sold risky mortgage bonds to their investors before the 2008 financial crisis that the banks knew could fail.
The Securities and Exchange Commission stated on Friday that JP Morgan Chase did not warn its investors that homeowners were behind on the mortgages that were tied to the bonds, reports Boston.com.
Both banks also failed to disclose their practices that let them profit while their investors lost millions. The settlement, which was announced Friday, will require both companies to pay $417 combined. JPMorgan Chase will pay $269.9 million, while Credit Suisse will pay $120 million.
Both banks have agreed to settle charges in the case without admitting or denying any wrongdoing. Robert Khuzami, the agency’s enforcement director, stated that inaccurate statements by banks in packaging and selling mortgage bonds “contributed greatly to the tremendous losses suffered by investors once the US housing market collapsed.”
Regulators have been working to target major financial institutions for their conduct in the years before the 2008 financial crisis, according to USA Today.
In the case of JP Morgan Chase and Credit Suisse, their investors who bought the securities backed by mortgages lost billions when home values plunged and millions of people were forced to default on their mortgages — losing their homes — in the 2008 recession.
JPMorgan Chase, the biggest bank in America by assets, released a statement about the SEC settlement, saying, “JP Morgan is pleased to have reached an agreement with the SEC to put these matters… behind it.”
Credit Suisse also issued a statement about the settlement, saying they were “pleased that it was able to resolve these investigations with the SEC.”
JPMorgan Chase and Credit Suisse’s payment of $417M is not the first time Chase has been in court to settle charges with the SEC. They agreed to pay $153.6 million in June 2011 for a similar case about mortgage securities.