JP Morgan to pay $13 billion in deal with US

The tentative agreement by the banking giant would settle some but not all charges related to questionable mortage-bacekd securities.

By businessed Oct 20, 2013 12:07PM

(This post is by The Associated Press.)


WASHINGTON — JPMorgan Chase & Co. has tentatively agreed to pay $13 billion to settle allegations surrounding the quality of mortgage-backed securities it sold in the run-up to the 2008 financial crisis, a person familiar with the negotiations between the bank and the federal government said Saturday.

If the agreement is finalized it would be the government's highest-profile enforcement action related to the financial meltdown that plunged the economy into the deepest recession since the Great Depression of the 1930s.

The person, who spoke on condition of anonymity because the deal has not been finalized, said Attorney General Eric Holder, Associate Attorney General Tony West, J.P. Morgan CEO Jamie Dimon and the bank's general counsel, Stephen Cutler, negotiated the tentative settlement in a Friday night phone call.


The person said the tentative agreement does not resolve a criminal investigation of the bank's conduct. It is being handled by federal prosecutors in Sacramento, Calif.


On Friday night, Holder told the bank that a non-prosecution agreement was a non-starter — meaning that the Justice Department will continue to conduct the criminal investigation of the financial institution, said the person. As part of the deal, the Justice Department expects JPMorgan to cooperate with the continuing criminal probe of the bank's issuance of mortgage-backed securities between 2005 and 2007, the person said.

JPMorgan spokesman Brian Marchiony and Justice Department spokesman Brian Fallon declined to comment.


Of the $13 billion, $9 billion is fines or penalties and $4 billion will go to consumer relief for struggling homeowners, the person said.


When the housing bubble burst in 2007, bundles of mortgages sold as securities soured and the investors who bought them lost billions. In the aftermath, public outrage boiled over that no high-level Wall Street executives had been sent to jail. Some lawmakers and other critics demanded that the big bailed-out banks and senior executives be held accountable.


In response, the government in January 2012 set up a task force of federal and state law enforcement officials to pursue wrongdoing with regard to mortgage securities.

In September, JPMorgan agreed to pay $920 million and admit that it failed to oversee trading that led to a $6 billion loss last year in its London operation. That combined amount, in settlements with three U.S. and one British regulator, is one of the largest fines ever levied against a financial institution. In another case, the company agreed to pay a $100 million penalty and admitted that its traders acted "recklessly" with the London trades.


In August, the Justice Department accused Bank of America Corp., the second-largest U.S. bank, of civil fraud in failing to disclose risks and misleading investors in its sale of $850 million in mortgage bonds in 2008. The Securities and Exchange Commission filed a related lawsuit. The government estimates that investors lost more than $100 million on the deal. Bank of America disputes the allegations.


The latest action against the beleaguered JPMorgan brought the weight of the Obama administration against the bank, which has enjoyed a reputation for managing risk better than its Wall Street competitors. JPMorgan came through the financial crisis in better shape than most of its rivals and Dimon, its CEO, charmed lawmakers and commanded the attention of regulators in Washington.


A number of big banks, including JPMorgan, Goldman Sachs and Citigroup, previously have been accused of abuses in sales of securities linked to mortgages in the years leading up to the crisis. Together they have paid hundreds of millions in penalties to settle civil charges brought by the SEC, which accused them of deceiving investors about the quality of the bonds they sold.


JPMorgan settled SEC charges in June 2011 by agreeing to pay $153.6 million and reached another such agreement for $296.9 million last November.


The banks in all the SEC cases were allowed to neither admit nor deny wrongdoing — a practice that brought criticism of the agency from judges and investor advocates.


But in a first for a major company, JPMorgan admitted in the agreement with the SEC over the $6 billion trading loss in its London operation that it failed in its oversight. The admission could leave the bank vulnerable to millions of dollars in lawsuits. JPMorgan also reached settlements over the trading loss with the Federal Reserve, the U.S. Office of the Comptroller of the Currency and Britain's Financial Conduct Authority.


The Justice Department is still pursuing a criminal investigation of the trading loss and a possible cover-up at the bank. Two of the bank's former traders in London are facing criminal charges. The SEC also is investigating individuals involved in the trading loss.

Mounting legal costs from government proceedings pushed JPMorgan to a rare loss in the third quarter, the first under Dimon's leadership. The bank reported Oct. 11 that it set aside $9.2 billion in the July-September quarter to cover a string of litigation stemming from the financial crisis and its "London Whale" trading debacle. JPMorgan said it has placed a total of $23 billion in reserve to cover potential legal costs.

___

Associated Press writer Marcy Gordon in Washington contributed to this report.

17Comments
Oct 20, 2013 2:55PM
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and let me guess...   in addition to the 13 billion and their part of the 26 billion settlement the top 5 banks entered into with the states attorneys general... of which jp morgan was one...    not one indictment...  not one of these as*holes is going to jail...   in fact no one to date has even been indicted let alone convicted....    what joke...  justice department my ****..... and let me guess who gets to keep the money...     
Oct 20, 2013 1:28PM
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When a large financial institution such as JP Morgan agrees to pay $13 billion to avoid further probing and going to trial, all sorts of alarm bells should be going off.

I suspect that, in truth, JP Morgan is only paying out pennies on every dollar of profit they raked in by their financial misfeasance and malfeasance leading up to the 2008 financial crisis.  Hopefully, some insider will eventually reveal the full story of their conspiracy of deceit.
Oct 20, 2013 4:53PM
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I say we deny the settlement and press on with investigations. In fact, I'm happy to forego every single Congressional salary to hire more investigators and auditors until we have every bankster in prison and every store-bought politician they are in bed with knelt over a guillotine. $13 billion? That's about one week's worth of corruption, control, manipulation and wrangling for JPM.
Oct 20, 2013 8:10PM
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I think it is about time for one of these crooks to actually go to jail.  Take any of the BOA, JP Morgan Chase, etc. CEO's and give them a 20 year sentence for being complicit in the fraud perpetrated on the American public due to their unbridled greed.

Then, we need to invoke the Switzerland law - no executive can make more than 20x the annual salary of the lowest paid employee PER MONTH.  The balance of what used to be paid to those greedy executives will be paid to shareholders in the form of dividends.

Lastly, we need to either recall every member of Congress or demand that they forfeit their salaries and benefits until such time as they actually do some work.  In-fighting with the other political party does not count as work.  It counts as recess.

Oct 20, 2013 10:36PM
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I hope they (the executives')  are charged criminally
Oct 21, 2013 9:23AM
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I think the government is now stealing from shareholders.  JPMorgan, at the government's request, assumed Bear Sterns and others during the financial meltdown, and now they pay fines for what those companies did before the assumed their businesses.  Sounds like the USSR.
Oct 20, 2013 3:30PM
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WHEN WILL SOYLANDRA, GE, GMC, OBAMA ACTIVIST GROUPS, SEIU AND THE REST OF

OBAMA'S PROGRESSIVE FRIENDS WHO GOT TAX PAYER STIMULUS BAILOUTS FREE LOANS

AND TAX BREAKS AND SCAM FRAUD PHONY SCANDAL MONEY GONNA BE PAID BACK?

ACORN IS BACK AND WORKING FOR OBAMA UNDER OBAMACARE!!! WHERE'S THE MEDIA???

THERE IS SO MUCH CORRUPTION AND SCANDALS IN THIS ADMINISTRATION GOING ON

NOBODY CAN KEEP UP WITH IT BUT OBAMA AND MEDIA CALL THEM PHONY!!! OBAMACARE

IS THE BIGGEST SCAM AND TAKEOVER OF AMERICA BY A SOCIALIST PARTY! OBAMA HAS

ALREADY TAKEN CONTROL OVER CHEAP ENERGY WITH HIS EPA NAZI REGULATIONS AND

STUDENT LOANS AND BANKING RULES AND NOW OBAMACARE! WHY THE HELL WOULD HE

SIGN 923 EXECUTIVE ORDERS???? THERE ARE SO MANY SCANDALS GOING ON WITH

THE IRS BENGHAZI FAST N FURIOUS STIMULUS OBAMA SHOULD BE IN JAIL!

 

Oct 21, 2013 10:02AM
Oct 21, 2013 9:39AM
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Jamie Dimon so called Iron Man on Wall Street by investors ?  J.P  Morgan Chase = To Big To Fail = To Big To Jail ! The Criminal Banking Cartel continues to Rape, Pillage and Plunder the American People !

Oct 20, 2013 6:44PM
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Morgan didn't even own WAMU and Bear until they bailed them out in late '08-09.

 

Which tells you what a stupid deal they made without getting indemnification and how immoral Obama is for suing the savior.

 

Same for jerk at BankAmerica who bought Merrill Lynch.

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