Security personnel for Chase Bank outside their headquarters in downtown Milwaukee, Wisconsin. The Bail Out the People Movement held a demonstration there demanding a moratorium on foreclosures. (Photo: Abayomi Azikiwe), a photo by Pan-African News Wire File Photos on Flickr.
JPMorgan, Justice Department near $13B settlement
Kevin McCoy and Kevin Johnson, USA
TODAY 7:54 p.m. EST November 18, 2013
The tentative deal would set a record for a Department of Justice settlement with a single firm
JPMorgan Chase and the Department of Justice are near final agreement on a record $13 billion settlement over problem mortgage securities, and could publicly announce the deal as early as Tuesday, according to a person familiar with the negotiations.
The nation's largest bank late last week agreed to take responsibility for problems with mortgage securities marketed by Washington Mutual, the failed bank JPMorgan acquired in 2008 during the financial crisis, said the person, who spoke on condition of anonymity because he was not authorized to discuss the issue publicly.
Several news organizations reported the bank had previously wanted to claim recovery via the Federal Deposit Insurance Corporation from the legal estate of Washington Mutual. The FDIC had taken control of Washington Mutual and later sold the assets to JPMorgan. Attorney General Eric Holder successfully sought affirmative language in the pending agreement that JPMorgan would not pursue such a strategy, according to the person familiar with the negotiations.
The tentative deal also calls for $4 billion in relief for homeowners, including $1.5 billion in principle write-downs on mortgages and $300 million in other relief, the person said. That part of the pending agreement would resolve civil investigations of JPMorgan by the offices of New York Attorney General Eric Schneiderman's office and California Attorney General Kamala Harris.
Also covered by the tentative deal is the $4 billion JPMorgan payment announced last month by the Federal Housing Finance Agency to resolve allegations that the bank violated securities laws in connection with $33.8 billion in mortgages sold to mortgage finance giants Fannie Mae and Freddie Mac.
The Department of Justice declined to comment on the negotiations. JPMorgan did not immediately respond to a message seeking comment.
The tentative agreement would set a financial record for a Department of Justice settlement with a single company.
The deal follows billions of dollars in other settlements reached by JPMorgan in recent months — including a tentative $4.5 billion settlement announced Friday with 21 major institutional investors over mortgage-backed securities sold to them before the financial crisis.
That agreement covered mortgage-backed securities trusts issued between 2005 and 2008 by JPMorgan and Bear Stearns, the investment bank and brokerage it also acquired during the financial crisis. Similar securities sold by Washington Mutual were not included, however.
JPMorgan also admitted wrongdoing and was fined more than $1 billion to settle investigations by five oversight agencies of the bank's "London whale" trading debacle. The bank initially asserted the trades, which racked up $6.2 billion in losses, had been a hedge against risk. But the strategy instead became proprietary trading for JPMorgan's benefit that was partly funded with federally insured deposits.
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