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) --

JPMorgan Chase

(JPM) - Get Free Report

was the loser among major U.S. financial names on Wednesday, with shares declining 2% to close at $47.79.


New York Times

early Wednesday reported JPMorgan was being investigated by federal prosecutors over whether or not the company took the proper steps required by law to alert regulators over concerns about Bernard Madoff before Madoff's Ponzi scheme was discovered. The report cited unnamed sources.

Madoff in June 2009 was sentenced to 150 years in prison, after pleading guilty for orchestrating the largest Ponzi scheme in U.S. history.

The report came less than two weeks after current and former officers involved with JPMorgan's now-infamous "

London Whale

" hedge trading losses of at least $6.2 billion were grilled by the Senate Permanent Subcommittee on Investigations.

In its

report about the London Whale matter

, the Senate Permanent Subcommittee on investigations, chaired by Senator Carl Levin (D., Mich.), made several recommendations, including the immediate implementation of the

Volcker Rule

, "to stop high risk proprietary trading activities and the build-up of high risk assets at federally insured banks and their affiliates."

According to the


, "at least eight federal agencies are investigating the bank."

JPMorgan Chase previously reported in its

annual 10-K filing

that its expenses for litigation reserves during 2012 totaled $3.7 billion, increasing from $3.2 billion in 2011.

Bank Stocks Pull Back

The broad indices ended mixed, after the National Association of Realtors reported its pending home sales index declined by 0.4% to 104.8% in February, although the index was still 8.4% higher than a year earlier. Economists on average expected pending home sales for February to increase by 1% from January, according to Zacks.

While it may seem strange after so many years of pressure on home prices from a glut of houses for sale, an inventory shortage has developed in many U.S. regions and is limiting sales, according to NAR chief economist Lawrence Yun.

The NAR report followed a report from CoreLogic on Tuesday, saying,

shadow inventory

-- distressed properties not yet listed for sale -- was declining sharply.

"Only new home construction can genuinely help relieve the inventory shortage, and housing starts need to rise at least 50 percent from current levels," in order to bring inventories to normal levels, Yun said. "Most local home builders are small businesses and simply don't have access to capital on Wall Street," he said, adding that "clearer regulatory rules, applied to construction loans for smaller community banks and credit unions, could bring many small-sized builders back into the market."


KBW Bank Index


was down 1% to close at 56.31, with all but six of the 24 index components showing declines.

Bank of America

Shares of

Bank of America

(BAC) - Get Free Report

were down slightly to close at $12.23. The shares have returned 5% this year, following a 110% return during 2012. The shares trade for 0.9 times their reported Dec. 31 tangible book value of $13.36, and for 9.4 times the consensus 2014 earnings estimate of $1.30, among analysts polled by

Thomson Reuters

. The consensus 2013 EPS estimate is 98 cents.

Atlantic Equities analyst Richard State said Wednesday the continued strengthening of the U.S. housing market supports "

at least 40% upside

" for Bank of America's shares, as rising home prices drive "lower operating costs, lower provision costs and increased capital return." The provision costs refer to additions to loan loss reserves, as well as reserves for mortgage repurchase claims.

Staite expects Bank of America's earnings per share to rise "towards $2.00 by 2016," as legacy mortgage costs decline, funding costs decline and the company continues to repurchase shares.

The analyst rates Bank of America "overweight," with a 12-month price target of $14.70, but sees further upside to a price of $17.20 by the end of 2014, as the shares trade up to a multiple of 1.1 times tangible book value.

-- Written by Philip van Doorn in Jupiter, Fla.

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Philip W. van Doorn is a member of TheStreet's banking and finance team, commenting on industry and regulatory trends. He previously served as the senior analyst for Ratings, responsible for assigning financial strength ratings to banks and savings and loan institutions. Mr. van Doorn previously served as a loan operations officer at Riverside National Bank in Fort Pierce, Fla., and as a credit analyst at the Federal Home Loan Bank of New York, where he monitored banks in New York, New Jersey and Puerto Rico. Mr. van Doorn has additional experience in the mutual fund and computer software industries. He holds a bachelor of science in business administration from Long Island University.