Los Angeles to consider cutting ties to JP Morgan
LOS ANGELES (AP) — A Los Angeles councilman proposed Wednesday that the nation’s second-largest city consider ending tens of millions of dollars of financial ties with troubled JP Morgan Chase & Co.
A motion introduced by Democrat Gil Cedillo seeks a review of city business with the nation’s largest bank, as well as an analysis of legal options to end those contracts.
It said a city retirement system holds over $100 million in JP Morgan stock and investments, and the city has a line of credit with the bank. The motion also suggests disqualifying the bank from doing further business with City Hall.
“We need to review the impacts that the repeated investigations, lawsuits and settlements involving JP Morgan have on our investments and holdings,” the motion concluded.
JP Morgan spokeswoman Suzanne Alexander Ryan declined comment.
JP Morgan has entered into a series of legal settlements over its sales of mortgage-backed securities in the years preceding the financial crisis.
As the housing market collapsed between 2006 and 2008, millions of homeowners defaulted on high-risk mortgages, leading to billions of dollars in losses for investors who bought securities created from bundles of mortgages.
In November, the bank agreed to pay $13 billion in a civil settlement with the Justice Department and state regulators over its sales of the mortgage-linked bonds. It was the largest settlement ever between the Justice Department and a corporation.
In addition, JPMorgan reached a $4.5 billion settlement in November that covered 21 major institutional investors.
Earlier this month, federal authorities announced the bank will forfeit a record $1.7 billion to settle criminal charges alleging it turned a blind eye to the Bernard Madoff fraud, plus pay an additional $543 million to settle civil claims by victims. It also will pay a $350 million civil penalty for what the Treasury Department called critical and widespread deficiencies in its programs to prevent money laundering and other suspicious activity.
The bank said in October that it set aside $9.2 billion in the July-September quarter to cover legal costs.
In a statement, Cedillo said the motion lays out options and welcomes discussion about the possibility of breaking ties with JP Morgan.
It also sends a message to other government entities, he said.
“JP Morgan targeted underserved communities and someone must hold them accountable,” Cedillo said. “If we want to make sure that banks like JP Morgan do not engage in such improper conduct in the future, they need to realize there is potential to lose business.”
It’s expected to take at least several weeks for the City Council to consider the proposal.
Mayor Eric Garcetti said in an interview Tuesday that he had not reviewed the motion but added, “I want to make sure we are putting our money in a bank that does more good than harm. So I think it is a legitimate question to ask.”
Garcetti, a Democrat, said JP Morgan can be credited with doing some things in Los Angeles but “no bank should be let off the hook just because they do those good works, if they violated the law.”
AP Business Writer Marcy Gordon in Washington contributed to this report.