From JP Morgan’s Q3 2012 Earnings Presentation – Is JPM smoothing repurchase reserves to offset losses from repurchases? ($231 of losses vs. $218 of a reserve release):
What we learned on October 1st 2012:
The attorney general of New York is suing JP Morgan for fraud in connection to losses of over
$22.5bn + $12.9bn = $35.4bn
The Attorney General of New York, Eric Schnedierman, sued JP Morgan over fraud in EMC’s Mortgage Origination Practices.
“For example, as of August 2012, the cumulative losses suffered by investors in 103 subprime and Alt-A securitizations that Bear Stearns sponsored and underwrote in 2006 and 2007 totaled approximately $22.5 billion, or approximately 26% of the original principal balance of $87 billion…Another $30 billion in unpaid principal on mortgages remain in these trusts today. 43% percent of that amount, or $12.9 billion is currently 90 days past due, in foreclosure, in bankruptcy or considered real estate owned by a bank (REO). This means current investors are likely to suffer additional losses going forward. The Attorney General seeks investor damages to recoup losses, as well as other equitable relief”
Despite that JP Morgan’s Litigation Reserves only increased by $684mm:
Questions for JP Morgan:
Your litigation related reserves only increased by $684mm in the quarter. We want to know more:
– The Attorney General of New York has sued you for losses of $22-34bn. What percentage of the $700mm relates to this suit?
– In light of the Attorney General suit and developments in other litigation, how is it appropriate to release mortgage repurchase reserves?
– What percentage of your litigation reserves accounts for potential LIBOR manipulation penalties and charges?
– What percentage of your litigation reserves accounts for potential liability from market manipulation from the London Whale?
Hat tip Manal Mehta