JPMorgan Chase sues Federal Deposit Insurance for over $1 billion: report

JPMorgan has said in a US federal court complaint that is suing the Federal Deposit Insurance Corp to recover more than $1 billion tied to its purchase of Washington Mutual, which collapsed during the 2008 financial crisis.

JPMorgan Chase, the largest US bank, said the FDIC failed to honour obligations under the Washington Mutual agreement, and that has subjected JPMorgan to a massive liability.

The FDIC became the receiver for Seattle-based Washington Mutual when it collapsed during the height of the financial crisis in September, 2008. It was the largest bank failure in US history. The FDIC brokered the sale of Washington Mutual's assets to JPMorgan for $1.9 billion. According to JPMorgan, the FDIC made promises to protect the bank against liabilities if it stepped in.

New York-based JPMorgan Chase & Co said in a court filing on Tuesday that the FDIC later declined to acknowledge that government and investors' claims against JPMorgan for sales of Washington Mutual's risky mortgage-backed securities should have been claims against the receivership, and not the bank.

Most of JPMorgan's mortgage-backed securities came from Washington Mutual and investment bank Bear Stearns, which it also acquired in 2008.

The FDIC did not immediately return calls seeking comment from The Associated Press early on Wednesday. The FDIC has said that JPMorgan should be responsible for any liabilities regarding the Washington Mutual acquisition.

The Washington Mutual receivership's assets are about $2.75 billion, according to JPMorgan.

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. That led to billions of dollars in losses for investors who bought securities created from bundles of mortgages.

Last month, 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.

The bank said in October that it set aside $9.2 billion in the July-September quarter to cover legal costs.