Thread: JP Morgan in record $13 BILLION settlement with US regulators

19 November 2013 Last updated at15:27 ET

JP Morgan in record $13bn settlement with US regulators


The settlement is the largest ever between a corporation and the US government

Related Stories

• JP Morgan agrees $4.5bn settlement
• JP Morgan in loss after legal costs

US bank JP Morgan has agreed to a record $13bn (£8bn) settlement with US regulators for misleading investors during the housing crisis.

It is the largest settlement ever between the US government and a corporation.

About $4bn of the settlement is to go to homeowners hurt by JP Morgan's practices.

As part of the settlement, the bank acknowledged it made "serious misrepresentations to the public".

"The conduct uncovered in this investigation helped sow the seeds of the mortgage meltdown," said Attorney General Eric Holder in a statement.

After the relief given to homeowners, $9bn will be paid to settle federal and state civil claims relating to misleading mortgage securities sold by the bank.

Some of that will be given to investors who lost money.

Faulty mortgages
JP Morgan has worked hard to put the mortgage crisis of 2006-2007 behind it.

The bank has been under investigation for selling low-quality mortgage-backed securities to investors who were unaware that the securities often contained faulty mortgages.


New York Attorney Eric Schneiderman tweeted a picture of him signing the agreement

According to the statement from the Department of Justice: "JPMorgan employees knew that the loans in question did not comply with those guidelines and were not otherwise appropriate for securitization, but they allowed the loans to be securitized - and those securities to be sold - without disclosing this information to investors."

A large portion of the mortgages under investigation by authorities were bought by JP Morgan when it acquired banks Bear Stearns and Washington Mutual at the height of the financial crisis of 2008-2009.

It is hoped that this fine will settle all of the civil penalties arising from those faulty sales, although criminal charges could still remain.

Sharp fallThe fine represents a sharp fall for JP Morgan, known for its "fortress balance sheet" and traditionally sterling reputation on Wall Street.

Boss Jamie Dimon was also a favourite with politicians in Washington, and seemed to help steer the bank through the worst of the financial crisis and its aftermath.

But that all seems to have changed in recent months.

This record fine follows an announcement a few weeks ago that a separate regulator, the Federal Housing and Finance Authority, had reached a $5.1bn settlement with the bank.

JP Morgan Chase & Co.

LAST UPDATED AT 19 NOV 2013, 15:31 ET

price	change	%
56.22	++0.48	++0.85

Last month, the bank agreed to pay more than $1bn to help it end various investigations into its 2012 "London whale" trading debacle, which cost the bank more than $6bn and raised questions about its oversight procedures.

The firm also reported a rare loss last quarter, having set aside an additional $9bn to help it deal with its mounting legal troubles.

In total, JP Morgan has had to set aside a total of $23bn to help it work through its many investigations by regulators in the US and abroad.

Worst behind themNonetheless, investors seem to continue to think that the bank will emerge relatively unscathed from the fines.
"The share price is bumping up against a ten year high," Duff McDonald, author of a book on JP Morgan, told the BBC.

"While no one likes a fine especially of this magnitude, I think shareholders are responding positively to it because it's resolving some uncertainty around the company."

While the settlement with the US Justice Department does mean that the bank has put the worst of its expected fines behind it, nonetheless, there are still nine ongoing investigations by regulators into practices at the bank.

These investigations include that bank's hiring practices in China as well as accusations that bankers at JP Morgan manipulated the Libor benchmark interest rate.

http://www.bbc.co.uk/news/business-25009683

Payment Terms

Terms call for JPMorgan to pay $9 billion for federal and state claims, with $2 billion to the Justice Department, $1.4 billion to the National Credit Union Administration and $515.4 million to the Federal Deposit Insurance Corp.

The state of New York will receive $613.8 million, California will get $298.9 million, Illinois will get $100 million, Delaware will get $19.7 million and Massachusetts will receive $34.4 million, according to the Justice Department’s statement.

The agreement includes a previously disclosed accord to end a 2011 Federal Housing Finance Agency lawsuit. The bank will devote $4 billion to consumer relief for affected homeowners, including principal forgiveness, loan modifications and efforts to reduce blight, according to the statement.

http://www.businessweek.com/news/201...-u-dot-s-dot-1

RELATED

http://www.alipac.us/f9/uk-fraud-age...-libor-297713/