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JPMorgan Chase's record $13 billion settlement has significant implications for the financial industry, but they may not be what casual observers expect. Following is a guide to the key takeaways from the deal.
October 20 -
JPMorgan Chase (JPM) has agreed to pay a group of financial services companies $4.5 billion to settle mortgage-repurchase and servicing claims.
November 15 -
Faced with a litany of legal and regulatory woes, JPMorgan Chase has vowed to minimize wrongdoing and tighten internal controls. But with financial incentives unchanged and regulators on the warpath, virtuous talk may not be enough to prevent more troubles.
August 12
JPMorgan Chase reached a $13 billion deal with the U.S. Justice Department that ends probes into the bank's sale of mortgage bonds, the largest amount paid by a financial firm in a settlement with the government.
"Without a doubt, the conduct uncovered in this investigation helped sow the seeds of the mortgage meltdown," Attorney General Eric Holder said in a statement. "JPMorgan was not the only financial institution during this period to knowingly bundle toxic loans and sell them to unsuspecting investors, but that is no excuse for the firm's behavior."
The settlement doesn't shield the bank or its employees from criminal liability, according to the Justice Department statement.
As part of the settlement, JPMorgan acknowledged it made "serious, material misrepresentations to the public," including the investing public about numerous residential mortgage-backed securities transactions, New York Attorney General Eric Schneiderman said in a statement.
"Today's settlement is a major victory in the fight to hold those who caused the financial crisis accountable," he said.
In the settlement's statement of facts, JPMorgan acknowledges that it regularly misrepresented to RMBS investors that the mortgage loans in various securities complied with underwriting guidelines. JPMorgan made these representations while its employees knew the loans didn't comply with the bank's stated guidelines, according to Schneiderman's statement.
JPMorgan still faces probes by the Justice Department that include its energy-trading business, recruiting practices in Asia and its relationship with convicted Ponzi scheme operator Bernard Madoff. Legal bills drove the bank to its first quarterly loss under Chief Executive Officer Jamie Dimon, and he has told investors the clashes probably will continue.
"Our preference is always to resolve it," Dimon told investors during a conference call last month to discuss the New York-based bank's $380 million third-quarter loss. "It is very hard to fight with your regulators or the federal government, but we want them to be fair and reasonable."
