J.P. Morgan the longtime teacher's pet, usually found sitting across from the President at meetings, has in a symbolic shift, been relegated to the corner, reports The Wall Street Journal (subscription only). This figurative demotion comes presumably as a result of civil investigations into the mortgage-backed securities that caused, in large part, the financial crisis of 2008.
That hasn't tarnished J.P. Morgan's reputation among investors and analysts however, as two-thirds of the mortgage-bond liability arise from Bear Stearns and Washington Mutual, which J.P. Morgan acquired in 2008 after strong encouragement by U.S. regulators, according the Journal. But one analyst stated: "JPMorgan took it on the chin," reports Bloomberg.
The Proposed Settlement
The tentative $13 billion settlement comes after months of settlement talks, when on Friday night, J.P. Morgan CEO Jamie Dimon spoke to Attorney General Eric Holder on the phone, according to Reuters. The settlement would bring to a close several investigations, conducted by government agencies including the Justice Department, Federal Housing Finance Agency ("FHFA"), Federal Deposit Insurance Corp., National Credit Union Administration, and the New York and California Attorneys General, reports Bloomberg.
The breakdown of the tentative $13 billion settlement would be: $4 billion for consumer relief, $5 billion in penalties, and $4 billion to settle the FHFA claims.
The one thing missing from the proposed settlement, and that could be a deal breaker, is the lack of a waiver for criminal liability. Instead, the deal would probably insist on J.P. Morgan's cooperation on any investigations into individuals associated with wrongdoing, reports Bloomberg.
Other Claims and Bank Settlements
This not the end, but merely the beginning in what will be a string of bank settlements. The FHFA alone has sued seventeen other banks over "faulty mortgage bonds," and is seeking $6 billion alone from Bank of America, according to Bloomberg. And of course, this doesn't even take into account J.P. Morgan's troubles with the "London whale" scandal out of its London headquarters, reports The Wall Street Journal. If the DOJ and J.P. Morgan can't reach a deal before Wednesday, the Journal says the DOD has threatened to files its civil case then.
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- Circuit Sends BofA Mortgage Settlement Back to State Court (FindLaw's U.S. Second Circuit Blog)
- No Admission, No Problem Says SEC Consent Judgment Appeal (FindLaw's U.S. Second Circuit Blog)