The six largest U.S. based banks have spent over $103 billion on legal fees over the last
five years. The two banks that have
spent the most on lawsuits and settling mortgage claims are JP Morgan Chase and
Bank of America. The two banks have
spent about $75 billion of the total amount.
The legal bills exceed the 2012 profits of the banks combined, which is
the year that much of the costs were amassed.
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Although the
financial crisis that centered on subprime mortgages hit its peak five years
ago, cases are just recently surfacing from the justice department to hold
banks liable. Attorney General Eric
Holder announced this month that more cases would be brought forward to prove
that banks intentionally misled consumers into buying into bad mortgages. Banks are also accused of manipulating
interest rates and inflated credit markets.
Some of the legal
fees have stemmed from acquisitions. JP
Morgan purchased Bear Sterns and Washington Mutual to save them from
default. Bank of America purchased the
failing Countrywide Financial in 2008.
Both Washington Mutual and Countrywide loan defaults have added to the
costs. So far, investors have left
pressure off of the banks from legal fees as they still see the acquisitions as
potential earnings in the future.
However, giving dividends for finance shareholders is common and the mounting
fees may affect future payouts.
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JP Morgan is
currently under investigation for seven separate cases from the Justice
Department, including one involving its hiring practices in China. JP Morgan also recently settled a case for manipulating energy markets in multiple states, which sparked a new investigation earlier this month. Bank of America paid $160 million in a recent
settlement for discrimination filed by black financial advisers. While no one has gone to jail yet, it looks
like big banks are finally being held accountable.
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