JPMorgan, U.S. in tentative $13 billion settlement

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JP Morgan Chase New York Headquarters at 477 Park Ave. in New York City.

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NEW YORK — JPMorgan Chase and the Department of Justice have tentatively agreed to a $13 billion civil settlement to resolve several investigations into the bank’s mortgage securities business, according to a U.S. official familiar with the negotiations.

The settlement includes $9 billion in fines and penalties and $4 billion in ‘consumer relief,’ including loan modifications, the official said.

A federal criminal investigation based in Sacramento continues, and the deal does not include a non-prosecution agreement that JPMorgan Chase had insisted be part of the deal, the official said.

As the criminal case develops, JPMorgan Chase has agreed to assist in an investigation that is pursuing possible charges against individuals, the official said.

JP Morgan Chase declined to comment to CNN.

The tentative deal includes a $4 billion settlement that settles allegations by the Federal Housing Finance Agency that JP Morgan Chase misled Fannie Mae and Freddie Mac when it sold them home loans, many of which soured.

Such practices were widely blamed for the 2008 financial crisis.

The settlement also would resolve a smaller separate case brought by New York Attorney General Eric Schneiderman. Schneiderman sued JP Morgan Chase in October over alleged deceptive practices in sales of mortgage bonds by Bear Stearns, which was acquired by JP Morgan Chase.

The $13 billion deal is $2 billion higher than the most recent offer by JPM, and came at the end of talks that included personal negotiations between Attorney General Eric Holder and JPM Chief Jamie Dimon.

Dimon visited the Justice Dept in late September for a meeting in Holder’s conference room, the official said, and last week the two men spoke by phone to discuss the final sticking point: Dimon’s insistence that the deal include a non-prosecution agreement.

Holder told Dimon it was a “non-starter” according to the official. In a call Friday at around 6pm, Holder and Dimon made the final deal after Dimon dropped the non-prosecution condition.

The $13 billion civil settlement covers conduct from 2005-2007 and includes investigations of the mortgage businesses of Western Union and Bear Stearns, which were both acquired by JPM.

Lawyers for both sides, led by Tony West, associate attorney general, and Stephen Cutler, JPM’s general counsel, are expected to work through the weekend to finalize details of the agreement, which will be announced in the coming days.

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