NYT: Mortgage Cases Could Cost Major Banks $50 Billion

Tuesday, 14 Jan 2014 07:17 AM

By Dan Weil

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A group of 16 big banks that are being investigated by the government for their sales of troubled mortgage investments could pay almost $50 billion to settle charges, according to The New York Times.

The Times based its story on a confidential analysis of the industry's legal exposure created by lawyers for one of the banks and on interviews with knowledgeable sources.

The $50 billion excludes the $13 billion that JPMorgan Chase already has agreed to pay the government for its mortgage misdeeds. The $50 billion could include $15 billion in relief for consumers, according to the analysis.

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Banks are using the JPMorgan settlement to figure out how much they will owe.

Bank of America may settle for $16.7 billion, according to the analysis. Royal Bank of Scotland could face a tab of $10 billion, Goldman Sachs $3.4 billion, Morgan Stanley $3 billion and Citigroup $1 billion.

Banks may welcome a settlement opportunity.

"Yes, $50 billion is a big number," Gerard Cassidy, a bank analyst at RBC Capital Markets, tells The Times. "But it is manageable for the 16 banks, and the industry wants to put this behind them."

Last year, the six biggest U.S. banks allocated more than $18 billion for their legal fees, Bloomberg reports.

"Legal-related costs significantly impacted results in 2013, and we think they'll stay elevated in the near term," Jason Goldberg, an analyst at Barclays, tells the news service. "Banks will try to get a lot done in year-end results to have less of a burden in 2014."

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