As one banking analyst stated to the Los Angeles Times, "[b]efore the crisis, Big Brother was asleep on the couch ... Now Big Brother is coming back with a vengeance."
In the largest government settlement, paid by a single company, $13 billion was the magic number to make JPMorgan's pending civil litigation go away -- that is more than half of JPMorgan's 2012 profits, reports the LA Times. Attorney General Eric Holder stated: "No firm, no matter how profitable, is above the law, and the passage of time is no shield from accountability," reports The New York Times. Two billion dollars of the settlement will not be tax deductible, but regulators agreed early on in discussions that the liabilities related to Bear Stearns and Washington Mutual would be deductible.
The settlement is broken up into a few components including cash payments and relief to distressed homeowners. Four billion dollars will be devoted to providing assistance to homeowners with half going to "principal writedowns" and the other $2 billion going to "refinancing mortgage loans at lower rates, donation of repossessed properties, and new mortgage loans to low-and moderate-income families harmed by the financial crisis," reports The Street. Families in areas hardest hit like California, New York and Detroit will receive relief as a result of the settlement, according to The New York Times.
In addition to the financial aspect of the settlement, there were other concessions. JPMorgan agreed to forfeit its right to recoup the settlement dollars it paid from the Federal Deposit Insurance Company, admitted to the statement of facts, and dropped demands that criminal investigations into the bank's conduct stop, again according to the Times.
JPMorgan has, and continues to contend that the government's prosecution was "unfair" because many of the problematic mortgage securities were acquired by JPMorgan when it purchased Washington Mutual and Bear Stearns "at the urging of the federal government," reports The Street. JPMorgan CEO Jamie Dimon said of Bear Stearns: "It was a house on fire -- it was imploding ... We did it because we were asked to. We never expected this kind of stuff to happen," reports the LA Times.
That said, it lays this chapter in the mortgage-securities fiasco to rest. On the other hand, other banks should take note, the government has only just begun. Eric Holder stated: "The size and scope of this resolution should send a clear signal that the Justice Department's financial fraud investigations are far from over."
What do you think of the JPMorgan/DOF $13 billion settlement? Do you think the settlement goes far enough? Let us know on LinkedIn.
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