Big banks' future legal bills just keep getting smaller all of the time.
In the latest boon from the bench, JPMorgan Chase on Wednesday convinced U.S. District Judge Jed Rakoff to dismiss the vast majority of claims brought against it by Dexia, slashing JPMorgan's potential liability in the case to $5.7 million from $774 million, according to JPMorgan's lawyer. French-Belgian bank Dexia claims that JPMorgan, along with Bear Stearns and Washington Mutual, which JPMorgan bought during the crisis, had sold it mortgage securities that the banks knew were toxic.
CNBC's Margaret Popper reports that Rakoff's decision turned on a minor technical point, that fraud claims have to explicitly be transferred. That minor technical point "could drastically cut future liabilities related to mortgage-backed securities suits for JPMorgan and other banks," Popper says. One big case that could be affected is the lawsuit by Fannie Mae and Freddie Mac against 17 banks over mortgages, notes Jessica Silver-Greenberg of the New York Times.
We may need to wait for Rakoff's final opinion, which could take months to arrive, before we can start sussing out the full significance of his decision.
But this has been a good seven days in court for the banks, no matter what. Less than a week ago, another federal judge tossed antitrust and RICO cases against JPMorgan and 15 other big banks involved in the Libor scandal.
Many more of these decisions, and that $100 billion in potential legal liability for the banks starts to look a little high.
The good news about that is maybe we won't have to worry any more about whether the banks have enough money socked away to cover their legal bills. The bad news is that, if civil lawsuits act as any sort of deterrent to bad behavior, then every one of these dismissals makes it that much easier for banks to behave badly in the future.