J.P. Morgan Shares Slide on ProPublica Report of Probe

[tridim]

J.P. Morgan Chase shares slid after nonprofit investigative journalism outfit ProPublica reported that the SEC is investigating whether “JPMorgan Chase allowed a hedge fund to improperly select assets for a $1.1 billion deal backed by subprime mortgages, according to people familiar with the probe.” ProPublica reports:

Called “Squared” and completed in May 2007, the deal was a collateralized debt obligation, or CDO, made up of pieces of other CDOs. The hedge fund, Magnetar Capital, based in Evanston, Ill., purchased the riskiest slice of Squared as part of a strategy to bet against the mortgage market….

While Magnetar bought the riskiest slices, the CDOs were created and marketed by investment banks. In the case of Squared, the SEC is examining whether JPMorgan adequately disclosed to the investors it marketed Squared to that Magnetar had a role in picking the securities that went into the deal while also betting against segments of the deal. The 294-page Squared prospectus <4>, which was created by JPMorgan, has generic language <5> warning that some investors and the CDO manager might have investments that conflict with the interests of other holders of the CDO.

If this rings a bell at all, it might be because it sounds somewhat similar to the issue that got Fabulous Fab and Goldman in hot water earlier this year. Anyway, investors seem far from freaked out about the probe. J.P. Morgan shares are down a bit, but only like 30 cents, or less than 1%.

http://blogs.wsj.com/marketbeat/2010/11/01/jp-morgan-shares-slide-on-propublica-report-of-probe/?mod=yahoo_hs

Finally the SEC is flexing some muscle against these criminals. Keep it up.

[HereSince1628]

1. This is what has us ~28 points down?

By the time we get to the bottom of the FRAUD the Dow will be back at 9000 f'ing points.

[truedelphi]

2. K & R for reading later. n/t

[xchrom]

3. I'll be surprised if this turns out to be

Anything more substantive than a feel good
Investigation.

Maybe a fine - but not jail time or confiscation
Of illegally obtained profits.

And both should happen.

[dixiegrrrrl]

4. 'zactly.

I cannot remember the last time the SEC had any real teeth.
A slap on the wrist and a "tax" usually suffices.
Then back to business as usual.

However, JC Morgan, according to some financial pundits, does seem to be having financial problems, apart from the current SEC issue.