Washington and New York - JPMorgan Chase’s record $13 billion (R127bn) deal to end US probes of its mortgage-bond sales would free the nation’s largest bank from mounting civil disputes with the government while leaving a criminal inquiry unresolved.
The tentative pact with the US Justice Department increased from an $11bn proposal last month and would be the largest amount paid by a financial firm in a settlement with the US. The deal would not release the bank from potential criminal liability, at the insistence of attorney-general Eric Holder, one source said.
“To not get the waiver from criminal prosecution is not good,” said Nancy Bush, an analyst at NAB Research. “What we’re looking for in a settlement of this size is certainty from things like the criminal prosecution of a company. Wall Street wants certainty.”
JPMorgan chief executive Jamie Dimon personally discussed the deal with Holder after markets closed on Friday as the banker sought to end probes that have beset his firm and resulted in its first quarterly loss under his watch. The agreement, which is not yet final, includes $4bn in relief for unspecified consumers and $9bn in payments and fines, according to another source who was briefed on the terms.
The payouts would cover a $4bn accord with the Federal Housing Finance Agency over the bank’s sale of mortgage-backed securities, that person said. The deal, which may be announced this week, resolved pending inquiries by New York attorney-general Eric Schneiderman, the sources said.
The settlement would amount to more than half of JPMorgan’s record $21.3bn profit last year. Some elements of the deal, such as relief to homeowners, would probably be tax deductible for the bank.
The outline of the tentative accord was reached between Holder, Dimon, JPMorgan general counsel Stephen Cutler and associate US attorney-general Tony West, said the person. Its statement of facts was still being negotiated.
Holder told Dimon that a release from the criminal inquiry would not be forthcoming, the source said. The accord would probably require JPMorgan to co-operate in criminal investigations of people tied to wrongdoing associated with its mortgage practices, the person said.
Justice Department spokesman Brian Fallon and Matt Mittenthal, a Schneiderman spokesman, declined to comment.
JPMorgan has paid more than $1bn to five regulators in the past month to settle probes into botched derivatives trades that lost more than $6.2bn last year. It also settled claims it unfairly charged customers for credit-monitoring products.
The bank’s hiring practices in Asia are under investigation. A source said it was the subject of a probe by Manhattan US attorney Preet Bharara into claims it abetted Bernard Madoff’s Ponzi scheme. – Bloomberg