JPMorgan Chase and Credit Suisse have agreed to pay a combined $417 million to settle federal civil charges that they sold risky mortgage bonds to investors ahead of the 2008 financial crisis that the banks knew could fail.
JP Morgan did not warn investors that homeowners were behind on their payments for the mortgages tied to the bonds, The Securities and Exchange Commission said Friday. And both banks failed to properly disclose their practices that allowed them to profit while investors lost millions, the SEC said.
When the real estate bubble burst, home values plunged and millions of people defaulted on their mortgages and lost their homes. Investors who bought the securities backed by mortgages lost billions.
Under the settlement announced Friday, New York-based JPMorgan is paying $296.9 million. Credit Suisse, which is based in Zurich, will pay $120 million. The banks agreed to settle the charges without admitting or denying wrongdoing. The money will go to the investors burned by the risky mortgage bonds.
Inaccurate statements by banks in packaging and selling mortgage bonds "contributed greatly to the tremendous losses suffered by investors once the U.S. housing market collapsed," Robert Khuzami, the agency's enforcement director, said in a statement.
Regulators have been targeting major financial firms for their conduct in the years preceding the 2008 crisis.
JPMorgan, the largest U.S. bank by assets, settled similar charges over mortgage securities with the SEC in June 2011 and agreed to pay $153.6 million.
Goldman Sachs & Co. agreed in July 2010 to pay $550 million to settle charges of misleading buyers of complex mortgage investment.
JPMorgan noted in a statement that the SEC accused the bank of negligence but not intentional misconduct.
"J.P. Morgan is pleased to have reached agreement with the SEC to put these matters ... behind it," the statement said.
The SEC's allegations against JPMorgan Chase & Co. included risky mortgage bonds sold by Bear Stearns. JPMorgan bought Bear Stearns when it was on the verge of collapsing in March 2008, six months before the peak of the crisis.
Credit Suisse Group AG, Switzerland's second-largest bank, also noted the SEC's allegation of negligence rather than intentional misconduct.
"Credit Suisse is pleased that it was able to resolve these investigations with the SEC," the bank said in a statement.