JPMorgan Chase Fined Historic $13 Billion for Mortgage Fraud

Search form

JPMorgan Chase Fined Historic $13 Billion for Mortgage Fraud

JPMorgan Chase Fined Historic $13 Billion for Mortgage Fraud
Mon, 10/21/2013 - by Jill Treanor and Simon Goodley
This article originally appeared on The Guardian

America's largest bank, JP Morgan, is close to finalizing a $13 billion record settlement with the U.S. authorities over a number of issues related to the subprime mortgage crisis.

The settlement, described as tentative in some reports, is even greater than the $11 billion that had been expected and is said not to release the bank from any criminal liability. It would also be the largest ever between the U.S. government and a single company.

The bank's chairman and chief executive Jamie Dimon had been involved personally in the discussions with the U.S. Department of Justice and this month JP Morgan admitted it had incurred legal expenses of $9.2 billion from regulatory investigations and lawsuits.

In total the bank has put aside $23 billion for potential litigation since 2010 – and has warned this could rise by a further $6.8 billion – in moves that illustrate the stunning reversal in fortunes of a bank that had survived the banking crisis relatively unscathed.

JP Morgan now faces more than a dozen investigations globally – from alleged bribery in China to a possible role in manipulating benchmark interest rates set in London known as Libor.

Dimon had steered the bank through the financial crisis without ever reporting a quarterly loss, but that record ended this month when he had to admit that legal expenses drove the firm to a loss of $400 million.

The latest settlement relating to mortgage-backed securities follows a fine of more than $900 million from a number of authorities over last year's London Whale trading incident, which Dimon had originally attempted to brush aside as "tempest in a teapot."

The Whale episode also lost the bank $6.2 billion and Dimon's bonus was halved as a consequence.

At issue in the latest settlement is whether the bank sold mortgages that it knew were riskier than they appeared. Investors, including government-owned mortgage agencies Fannie Mae and Freddie Mac, said that the bank told them loans were safer than they were, or that the bank was negligent in not verifying information from borrowers relating to their income and their ability to repay the debt.

A sizable chunk of the $13 billion relates to customer redress. According to Bloomberg the settlement includes $4bn to the Federal Housing Finance Agency – which incorporates Fannie Mae and Freddie Mac.

Dimon secured the tentative deal in a meeting with the Justice Department's attorney general, Eric Holder, according to CNBC. Steve Cutler, the bank's general counsel, and Tony West, Holder's deputy, were said to be involved.

Dimon and Holder had met face-to-face in Washington last month. A well-connected figure in financial and political circles, Dimon took the helm of JP Morgan in December 2005. He is now running the biggest U.S. bank in terms of assets.

As well as surviving the financial crisis, the banker has also resisted calls to split his joint roles at the bank.

The settlement is partly the result of JP Morgan saving two firms – Bear Stearns and Washington Mutual – which account for about 80% of the securities involved in the $13 billion fine. The U.S. government encouraged JP Morgan to rescue both institutions as they were collapsing during the financial crisis.

This month the bank said Dimon was no longer chairman of JP Morgan's main US retail banking subsidiary.

JP Morgan did not comment, and the U.S. Department of Justice could not be reached.

Ongoing Tempest

For all his smooth talking, it is likely that the most memorable line to emerge from the career of JP Morgan boss Jamie Dimon will be his crack about a "tempest in a teapot". That was his attempt to dismiss reports of problems in the bank's London office, where it turned out that his traders had lost $6 billion.

The comment was perhaps the result of confidence gleaned from years of uninterrupted success, which included being one of the few bankers to emerge from the financial crisis with an enhanced reputation. However, the pressure is now increasing on Dimon as he wrestles with a string of legal complaints.

This was not how it was all meant to be, as Dimon has long appeared to have led a blessed life.

A protege of former Citigroup boss Sandy Weill, who is often described as a "Wall Street legend", he graduated as a Baker scholar from Harvard Business School, an honour given only to the top 5% of the graduating MBA class. His classmates included GE boss Jeff Immelt, and Dimon's future wife, Judy.

Originally published by The Guardian

Article Tabs

The new 40-page report published by Oxfam International also said the global fossil fuel sector now receives $1.9 trillion in subsidies each year.

Edward Snowden

Snowden told the audience he engaged in civil disobedience because he believes the democratic system of government is not able to work when people don’t know what their government is doing.

Large corporations are the winners and taxpayers are the losers when transparency, accountability and the public interest are sold out to for-profit firms.

The city's social justice roots are centuries old – and today Seattle is also home to more than 70 social justice organizations and more than a dozen progressive film festivals.

Coinciding with the National Day Against Police Brutality and Mass Incarceration, people in Santa Rosa, Calif., will hold a vigil and community potluck Wednesday to commemorate the teen's tragic death.

“We wanted to take action to dramatize the betrayal of the American people and show that we will resist and attempt to disrupt or at least expose pro-corruption politicians' ability to raise big money.”

Posted 6 days 13 min ago

The oil giant, with $21.4 billion in 2013 revenue, is trying to buy upcoming municipal elections in Richmond that pit a pro-Chevron bloc of city council members against an anti-Chevron bloc.

Posted 6 days 22 hours ago

The Seattle festival showcases bold visions on the screen, with 50 films challenging societal structures through creative perspectives and a critical eye.

Posted 6 days 22 hours ago

Drug and device makers paid doctors $380 million in speaking and consulting fees over a five-month period last year – and saw a healthy return on their investment.

Posted 4 days 22 hours ago

As of September 19, 181 institutions and local governments and 656 individuals representing over $50 billion in assets have pledged to divest from fossil fuels.

Posted 4 days 23 hours ago

So little of our national wealth is going to feed people or provide jobs and instead, the richest Americans vastly increased their wealth this past year. But what vaulted these individuals to the top?

Coinciding with the National Day Against Police Brutality and Mass Incarceration, people in Santa Rosa, Calif., will hold a vigil and community potluck Wednesday to commemorate the teen's tragic death.

In times of crisis, the term “protect the women and children” might still come to mind.

As of September 19, 181 institutions and local governments and 656 individuals representing over $50 billion in assets have pledged to divest from fossil fuels.

Inequality is all anybody can talk about, except Democrats on the campaign trail who desperately need to turn out the very people so disproportionately affected by it: young and minority voters.

Sign Up