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Monster fine for JPMorgan?

October 20, 2013

Several news outlets have reported that US bank JPMorgan Chase & Co. may agree to a record $13-billion fine to settle a probe on charges that it over-valued mortgage-backed securities sold before the 2008 recession.

https://p.dw.com/p/1A2iv
A JPMorgan sign is seen outside the office tower housing the financial services firm's Los Angeles, California offices, August 8, 2013. US banking giant JPMorgan Chase said August 8, 2013 it is facing parallel civil and criminal investigations over its sale of mortgage-backed securities before the financial crisis. JPMorgan disclosed in a securities filing that in May it was notified by the civil division of the US Attorneys Office for the Eastern District of California stating that it had preliminarily concluded that the bank 'violated certain federal securities laws' in connection with the subprime mortgage-backed securities. AFP PHOTO / Robyn Beck (Photo credit should read ROBYN BECK/AFP/Getty Images)
Image: Robyn Beck/AFP/GettyImages

JPMorgan Chase & Co. might be prepared to pay a record fine of $13 billion (9.5 billion euros) to settle investigations from the US Justice Department and other government agencies in Washington, according to several reports published on Saturday.

The investigations pertained to mortgage-backed securities sold to investors in the run-up to the so-called "financial crisis" of 2008 and the subsequent recession of 2009. JPMorgan is accused of knowingly selling the securities to investors at inflated prices; investors lost billions of dollars on these "sub-prime mortgages."

Major US newspapers the Wall Street Journal and New York Times first reported the supposed, tentative agreement, citing sources who could not give their names as the deal was not finalized. The Associated Press and Reuters soon followed with similar statements from an unnamed "person familiar with the negotiations," as AP described it.

JPMorgan and US Justice Department officials declined to comment on the record.

The agreement was reportedly reached late on Friday in a phone call between US Attorney General Eric Holder, his deputy, and JPMorgan's top lawyer Steven Cutler. The company was reportedly unwilling to pay in excess of $11 billion in an out-of-court settlement until Friday.

This reported settlement, if confirmed, would not bring an end to a separate criminal investigation into the bank conducted by a Sacramento court in California.

In September, JPMorgan agreed to a settlement of $920 millionin a separate British case, admitting it had failed to oversee its London offices well enough when a rogue trader lost $6 billion in derivatives trading. This was an unusual step - in similar past settlements with regulatory bodies in the US and the UK, banks were permitted to neither confirm nor deny culpability in exchange for paying the fine.

JPMorgan also posted a rare loss for the July-September quarter this year, attributing this in no small part to the allocation of $9.2 billion for legal fees in that period.

msh/mz (AP, AFP, Reuters)

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