News / Economy

US Investigating Banks' Pre-recession Deals

FILE - Workers are reflected in the windows of JP Morgan Chase offices.
FILE - Workers are reflected in the windows of JP Morgan Chase offices.
VOA News
The tentative $13 billion penalty the largest U.S. bank has agreed to pay the government in connection with its loose financial deals in the years before the country's steep recession is only one of several ongoing investigations.
 
JPMorgan Chase negotiated the penalty with the country's Justice Department late last week. It would be the biggest ever against a U.S. company.
 
But the government refused the bank's bid to end a companion criminal investigation centering on the quality of securities it sold to investors that included thousands of home loans on which borrowers were defaulting. That made the securities all but worthless.
 
Bank analyst Bert Ely told VOA that in the years before the U.S. economic downturn in 2008 banks often engaged in weak reviews of borrowers' financial credentials before granting them loans.
 
"There were lots of losses.  And anytime there are losses, then those investors who suffered losses start looking for villains. And unfortunately there were a lot of villains in the housing finance business, and in all aspects of it, JPMorgan was just one of many," said Ely.
 
Ely added that "one of the ironies" is that part of JPMorgan's problem is that it bought - at the government's behest - two failing financial institutions, investment bank Bear Stearns and Washington Mutual Bank. But JPMorgan is now responsible for the lending practices at the two banks, as well as its own actions.
 
The government is also looking at the lending practices and security sales at other major U.S. banks, including Bank of America, Goldman Sachs and Morgan Stanley.
 
Lending was encouraged

Ely said that while U.S. financial institutions are not blameless for their role in the country's deepest recession since the Great Depression in the 1930s, their actions also are partly caused by the fact that U.S. laws encourage lending to promote economic activity.
 
"I would argue that a lot of these activities and the extent of them really are a product of U.S. banking regulation and the tax laws that encourage ... borrowing by businesses as well as individuals,” said Ely.
 
There is no date set for finalizing the JPMorgan settlement with the government. The tentative deal calls for $9 billion in fines or penalties, with $4 billion going to home loan borrowers. Millions of borrowers lost their houses when they could no longer make loan payments after being laid off from their jobs.
 
The bank has set aside at least $23 billion in reserves to cover settlements and legal expenses related to its actions before and after the financial crisis.
 
Ely said it could be another couple years before all the U.S. investigations of the activities of financial institutions in the lead-up to the recession are finished.

You May Like

Video British Fighters on Frontline of ISIS Information War

It’s estimated that several hundred British citizens are fighting for Islamic State alongside other foreign jihadists More

Pakistan's Political Turmoil Again Shines Spotlight on Military

Thousands of protesters calling for PM Sharif to step down continue protests in front of parliament, as critics fear political impasse could spur another military coup More

Photogallery Ebola Quarantines Spark Anxiety in Liberian Capital

Food prices rise sharply as residents attempting purchases clash with security forces, leaving one person dead More

Featured Videos

Your JavaScript is turned off or you have an old version of Adobe's Flash Player. Get the latest Flash player.
Native Bees May Help Save Cropsi
X
Deborah Block
August 22, 2014 12:23 AM
U.S. President Barack Obama has called for a federal strategy to promote the health of bees that have been declining. The honeybee has been waning due to parasites, disease and pesticides. Wild bees may be used to take over their role as crop pollinators. Scientists first need to learn a lot more about wild bees, says biologist Sam Droege, who is pioneering the first national inventory on native bees. VOA’s Deborah Block went to his research laboratory in Beltsville, Maryland, to bring you more.
Video

Video Native Bees May Help Save Crops

U.S. President Barack Obama has called for a federal strategy to promote the health of bees that have been declining. The honeybee has been waning due to parasites, disease and pesticides. Wild bees may be used to take over their role as crop pollinators. Scientists first need to learn a lot more about wild bees, says biologist Sam Droege, who is pioneering the first national inventory on native bees. VOA’s Deborah Block went to his research laboratory in Beltsville, Maryland, to bring you more.
Video

Video US Defense Officials Plan for Long-Term Strategy to Contain Islamic State

U.S. defense officials say American air strikes in Iraq have helped deter Islamic State militants for the time being, but that a broad international effort is needed to defeat the extremists permanently. Defense Secretary Chuck Hagel warned Thursday that the group formerly known as the Islamic State in Iraq and the Levant, or ISIL, is better organized, and financially and militarily stronger than any other known terrorist group. Zlatica Hoke has more.
Video

Video Drug-Resistant Malaria Spreads in Southeast Asia

On Thailand’s border with Myanmar, also known as Burma, a malaria research and treatment clinic is stepping up efforts to eliminate a drug-resistant form of the parasite - before it spreads abroad. Steve Sandford reports from Mae Sot, Thailand.
Video

Video Gaza Conflict, Hamas Popularity Challenge Abbas

The Palestinian unity government of Mahmoud Abbas has failed to convince Hamas to agree to Egyptian-negotiated terms with Israel on a Gaza cease-fire. VOA State Department Correspondent Scott Stearns reports on what the Gaza conflict means for President Abbas, with whom U.S. officials have worked for years on a two-state solution to the Israeli-Palestinian conflict.
Video

Video Nigeria's 'Nollywood' Movie Industry Rolls in High Gear

Twenty years after its birth in a video shop in Lagos, Nigeria's "Nollywood" is one of the most prolific film industries on earth. Despite low budgets and whirlwind production schedules, Nigerian films are wildly popular in Africa and industry professionals say they hope, in the future, their films will be as great in quality as they are in quantity. Heather Murdock has more for VOA from Lagos.
Video

Video UN Launches 'Biggest Aid Operation in 30 Years' in Iraq

The United Nations has launched what it describes as one of the biggest aid operations in 30 years in northern Iraq, as hundreds of thousands of refugees flee the extremist Sunni militant group calling itself the Islamic State. As Kurdish and Iraqi forces battle the Sunni insurgents, the fighting has forced more people to flee their homes. Kurdish authorities say the international community must act now to avert a humanitarian catastrophe. Henry Ridgwell reports for VOA from London.
Video

Video Cambodian American Hip Hop Artist Sings of Personal Struggles

A growing underground movement of Cambodian American hip hop artists is rapping about the struggles of living in urban America. Most, if not all of them, are refugees or children of refugees who came to the United States from Cambodia to escape the Khmer Rouge genocide of the 1970s. Through their music, the artists hope to give voice to immigrants who have been struggling quietly for years. Elizabeth Lee reports from Long Beach, California.
Video

Video African Media Tries to Educate Public About Ebola

While the Ebola epidemic continues to claim lives in West Africa, information technology specialists, together with radio and TV reporters, are battling misinformation and prejudice about the disease - using social media to educate the public about the deadly virus. VOA’s George Putic has more.

AppleAndroid

World Currencies

EUR
USD
0.7492
JPY
USD
102.27
GBP
USD
0.5960
CAD
USD
1.0950
INR
USD
61.300

Rates may not be current.