The U.S. Department of Justice has stepped up a probe in recent weeks into Bear Stearns mortgage dealings in the run-up to the financial crisis, adding to JPMorgan Chase's legal problems, according to three sources familiar with the situation.
Reuters reports that JPMorgan bought failing Bear Stearns with government encouragement during the financial crisis in 2008, but then became embroiled in private lawsuits by mortgage bond insurers alleging that home loans underlying securities were rotten from the start.
The developments follow new mortgage-related investigations by the Eastern District of California. All are fresh obstacles for CEO Jamie Dimon who is striving to restore the bank's reputation for controlling risks after losing more than $6.2bn in 2012 on its so-called 'London Whale derivatives trades.
A source familiar with the situation told Reuters on Thursday that the California probes involve mortgage bonds offered by JPMorgan itself, and not those by companies the largest U.S. bank bought during the crisis.
In addition to the JPMorgan mortgage investigations, the Justice Department filed a civil lawsuit on Tuesday against Bank of America over $850m in mortgage securities.
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