Today, after months of very public negotiations, press leaks, and aggression on both sides, JPMorgan Chase signed a $13 billion settlement with the Justice Department over a bundle of mortgage-related lawsuits. Today's settlement is really for $9 billion, since $4 billion of the total was settled back in October as part of a deal with the FHFA. But the $13 billion number will rule the day.
$13 billion! It's quite a big number, especially when you consider that JPMorgan's initial offer to settle a big chunk of the claims against it was $1 billion. The Times has good details about the back-and-forth between federal prosecutors and bank officials, including a last-minute phone call from JPMorgan CEO Jamie Dimon that may have saved the deal and averted an embarrassing civil case.
Of the $13 billion, $7 billion will go to JPMorgan investors who lost money on soured mortgage securities, including pension funds and agencies like the FHFA. $4 billion or so will go to normal people, in the form of write-downs and mortgage modifications for those whose homes are underwater. $2 billion will go to settle a California-based mortgage case. And "a credit union association and state attorneys general in California and New York as well as the Justice Department’s own civil division" will get the rest.
Attorney General Eric Holder, whose office strong-armed Dimon into upping the amount of the settlement, is crowing today, having shown that federal prosecutors can indeed prevail in negotiations with big banks. “Without a doubt, the conduct uncovered in this investigation helped sow the seeds of the mortgage meltdown,” Holder said. “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."
JPMorgan Chase isn't out of the woods. It's still facing a number of lawsuits, and it hasn't gotten immunity from further criminal prosecution. Not to mention the reputational wounds it's sustained. (See: #AskJPM.) But at least the firm can get on with its other challenges now. With $13 billion headed out of the bank's coffers and into Uncle Sam's custody, the big albatross is now off Jamie Dimon's neck, even if many smaller ones remain.