JPMorgan, like many other bank stocks, has been volatile lately because of legal costs and a general bearishness concerning the banking sector. While investors may believe this is the bottom, and that stocks like JPMorgan are value plays, even CEO Jamie Dimon says he isn’t sure when the sector will stabilize. Its recent settlement with the government over Bear Stearns is symptomatic of the kind of messes banks have to clean up, even years after the end of the financial crisis.
JPMorgan, which bought Bear Stearns during the credit crisis, is paying $500 million as a final chapter to extended class action litigation against the parent company. The allegations were that Bear Stearns officials mislead clients when it sold certificates that were backed by more than 47, 000 subprime or low documentation mortgages between 2006 and 2007, according to Reuters.
While stronger banks grew swallowing up smaller, more challenged entities during the financial crisis, they also swallowed up the problems of the small banks like Bear Stearns. Now JPMorgan has to pay for the sins Bear Stearns committed even before it was taken over. “Sins” isn’t from the point of of view of JPMorgan, which denied wrongdoing in its settlement, but that is the reality of regulations.
CEO Jamie Dimon said banks were “under assault” from regulations, but then mended his words, presumably not to sound like he was stirring up trouble; “Let me take back some of those words. We have worked very closely with regulators all the time, ” he said. “I was referring to the fact that there are lots of different regulators. It’s hard to deal with. We’re going to deal with it. My job is to deal with this, not to complain about it”, he said, according to CNBC.