A JPMorgan employee is cooperating with federal investigators examining whether the bank knew the mortgage bonds it sold were of poor quality, a person familiar with the probe said.
Bloomberg reports that the JPMorgan employee told her superiors at the bank they were vastly overstating the quality of mortgages packaged into securities, according to the person, who asked not to be identified because the matter isn’t public.
The Justice Department also has documents showing JPMorgan was aware it was selling residential mortgage-backed securities of poor quality, the person said.
The disclosure of a cooperator comes as the lender is in talks to pay about $11bn to end investigations into its mortgage-bond sales practices by state and federal authorities, according to people familiar with the talks, who requested anonymity because the negotiations are private. The discussions are fluid as is the size of a possible settlement, the people said.
The Justice Department is under pressure from U.S. Senator John McCain to hold individual executives personally accountable for any wrongdoing at the bank. McCain, the ranking Republican on a Senate subcommittee that probed JPMorgan’s record trading loss last year, sent a letter yesterday to Attorney General Eric Holder, criticizing Holder’s 26th September meeting with JPMorgan Chief Executive Officer Jamie Dimon.
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