- UBS last month agreed to a precedent-setting $885M settlement, or more than 90% of expected losses on MBS it packaged. The notional value of paper sold by JPMorgan (JPM) is 5x larger than that of UBS, leading to a figure close to the $6B range. JPMorgan - negotiating for a lower amount - says claims against other banks allege fraud, making their offenses more serious.
- $6B would be the high-end of what JPMorgan last year figured was its liability in the case (the suit is over $33B in MBS). The House of Dimon could await its day in court, but nearly all initial rulings have gone against the banks thus far. A settlement before the summer 2014 trial date still looks probable.
- Watching closely will be Bank of America (BAC) and RBS, both of which have heavy exposure to the FHFA suits and have yet to settle. Morgan Stanley estimates a worst-case scenario of $3.6B for BofA vs. a base case of $2B.