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

carbon emissions, mercury emissions, EPA, Clean Air Act

The Supreme Court invalidated a key Obama administration environmental regulation aimed at limiting emissions of mercury and other hazardous pollutants mainly from coal-fired power plants.

U.K. fracking, anti-fracking movement, Cuadrilla, shale gas drilling

It's a major blow to what would have been the U.K.’s biggest round of fracking so far.

A yes vote would mean depression almost without end – by contrast, a no vote would at least open the possibility that Greece, with its strong democratic tradition, might grasp its destiny in its own hands.

Fight for $15, $15 minimum wage, bank bailouts, corporate subsidies,

Municipal leaders should be commended for acknowledging the current wage is too low – but phasing in a higher wage over many years is unacceptable in an economy where costs of living are rising and wages are falling.

Greek debt crisis, Greek anti-austerity movement, Alexis Tsipras, Troika, Syriza party, Greek referendum, Euro crisis

Greeks will find their savings blocked and their banks closed for a week following a fateful weekend that has shaken Europe’s single currency.

Fight for $15, $15 minimum wage, bank bailouts, corporate subsidies,

Municipal leaders should be commended for acknowledging the current wage is too low – but phasing in a higher wage over many years is unacceptable in an economy where costs of living are rising and wages are falling.

Posted 10 hours 49 min ago
payday lending, predatory loans, predatory payday lenders, Consumer Financial Protection Bureau

America has 30,000 post offices – mostly in lower-income zip codes where bank branches are vanishing and payday lenders spread like toadstools after rain – making a public option for basic financial services a no-brainer.

Posted 5 days 3 hours ago
Trans-Pacific Partnership, TPP, Transatlantic Trade and Investment Partnership, TTIP, Fast Track Authority, Trade Promotion Authority

In a win for multinational corporations and the 1 percent, the Senate advanced Fast Track.

Posted 6 days 13 hours ago
Move Your Money, Wells Fargo crimes, illegal foreclosure, subprime mortgage lending, predatory loans

The only way the big banks will feel something similar to the loss and harm they caused is if you Move Your Money from those institutions to second tier banks, community banks and credit unions – so join the campaign now.

Posted 4 days 9 hours ago

#BlackLivesMatter and Shamell Bell is breaking it down. But first up, white privilege has something to say to white privilege.

Posted 6 days 13 hours ago

#BlackLivesMatter and Shamell Bell is breaking it down. But first up, white privilege has something to say to white privilege.

$15 minimum wage, Fight for $15, Personal Care Attendants, Quality Home Care Workforce Act, #WageAction

Tears of joy streaked the faces of cheering home care workers assembled in their Dorchester union hall last week as a decades-long struggle for recognition and a living wage culminated in a historic moment of celebration.

Affordable Care Act, Obamacare, single-payer health care, uninsured Americans, right to healthcare

“What the United States should do is join every other major nation and recognize that healthcare is a right of citizenship,” said presidential candidate Bernie Sanders, who advocates a Medicare-for-all, single-payer system.

payday lending, predatory loans, predatory payday lenders, Consumer Financial Protection Bureau

America has 30,000 post offices – mostly in lower-income zip codes where bank branches are vanishing and payday lenders spread like toadstools after rain – making a public option for basic financial services a no-brainer.

Sign Up