NEW YORK (Bloomberg) -- JPMorgan Chase & Co. lost another bid to reclaim security for a $1.5 billion loan to General Motors' bankrupt predecessor.
A federal appeals court Monday declined to reconsider a ruling that the bank had forfeited its collateral, whether it intended to or not.
In the long-running case, JPMorgan argued that its lawyers accidentally gave up its rights to the security for the loan and weren't authorized to act on the deal. After the appeals court sided with GM's creditors in January, groups of lenders weighed in to say that many companies might find it harder to borrow if lenders couldn't be confident that assets were backing money they advanced.
Asset-backed lending is a $620 billion market, the Commercial Finance Association told the judges in court filings. Borrowers include businesses that have trouble raising money elsewhere, the group said. Without the collateral, JPMorgan, the biggest U.S. bank, becomes an unsecured lender to GM's bankrupt shell company, which has little money left to pay anyone.
In bankruptcy court, the trust for so-called Old GM's creditors has been trying to fend off possible claims from drivers suing over the carmaker's faulty ignition switch, telling a judge that the obligation belongs to the surviving automaker bailed out by the U.S. in 2009.
The trust said in February that 90 percent of its assets were gone, leaving $843 million in the form of GM stock to pay creditors owed almost $32 billion, including New York-based JPMorgan.