The banking industry could be on the hook for tens of billions of dollars in legal costs if government officials apply the same regulatory standards to other banks that they have in their sweeping mortgage-fraud investigation of JPMorgan, securities analysts tell the Fox Business Network.
A final deal, expected to be announced Thursday or Friday of this week, could then open up other large banks to similar litigations, analysts say.
The reason: Many of the regulatory issues government officials are pressing against JPMorgan involve its financial-crisis purchases of Bear Stearns and the bank Washington Mutual, both at the behest of the federal government.
Several other large banks also completed similar purchases at the time including Bank of America’s acquisition of Merrill Lynch, Wells Fargo’s purchase of Wachovia, PNC Financial’s purchase of National City Bank, according to bank analyst Dick Bove of Rafferty Capital Markets.
'The question that investors must ask is: ‘Will the government apply this set of precedents to JPMorgan Chase alone or will it now seek to extort funds from other banks involved in assisted mergers', Bove said in a note to clients on Monday.
'All of these banks are guilty of the same things as JPMorgan', Bove said in an interview. 'Forget JPMorgan, the government is going to go after every major bank with the potential civil lawsuits for tens of billions of dollars'.
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