US bank to pay $13bn for role in meltdown

JPMorgan agrees deal to settle probes into bad loans sold before the 2007 crisis, but criminal proceedings to continue. ● JPMorgan has agreed a provisional deal with the US government to pay $13bn to settle investigations into bad mortgage loans the bank sold to investors before the financial crisis. Under the agreement, the bank will pay $9bn in fines to the US government and $4bn for relief for struggling homeowners, sources told the AP news agency on Saturday. ● The tentative deal does not release the bank from criminal liability, a factor that had been a major sticking point in the discussions, the source said. If the agreement is finalised it would be the US government's highest-profile enforcement action related to the financial meltdown that plunged the economy into the deepest recession since the 1930s. ● As part of the deal, the Justice Department expects JPMorgan to co-operate with the continuing criminal probe of the bank's issuance of mortgage-backed securities between 2005 and 2007, the person said. When the housing bubble burst in 2007, bundles of mortgages sold as securities soured and the investors who bought them lost billions.

Bob Adelmann: JP Morgan Buying Its Way Out of Legal Troubles ■ Considering JPM's total assets of $2.5 trillion, annual revenues of $100 billion, and net earnings of $21 billion a year, the fine it has agreed to pay can be put into proper perspective: It’s “chump change,” as Michael Hiltzik put it, writing in the Los Angeles Times. The bank will be getting off easy if the Justice Department goes along with the deal. JPM, aware that the day of reckoning was near, had set aside $28 billion of shareholders’ capital in reserve, just in case. Even though the bank is hoping to get off at half of those projected losses, the agreement offered comes with strings: Jamie Dimon, JP Morgan's CEO (shown), not only wants the settlement to include all the other pending lawsuits (including the interest-rate manipulations known as Libor and the trading losses incurred by Bruno Iksil, better known in the trade as the “London Whale,” who cost the bank more than $6 billion when his excessively large trades went south), he wants all criminal investigations to go away as well.

Barry Grey: Blanket settlement with JPMorgan: A $13 billion cover-up ■ The $9 billion fine, the largest penalty ever imposed on a US corporation, is less than half the $21 billion profit JPMorgan recorded in 2012. The bank is pulling in enormous profits despite having set aside $28 billion since 2010 to cover legal costs. It is necessary to place the size of the fine in the context of the economic damage resulting from the bank's practices. Reportedly, $4 billion will go to settle a suit by the Federal Housing Finance Agency (FHFA) charging JPMorgan with knowingly making false statements and omitting material facts in selling $33 billion in worthless mortgage bonds to the government-sponsored mortgage finance companies Fannie Mae and Freddie Mac at the height of the subprime mortgage bubble (2005-2007). That is about 2 percent of the $188 billion in taxpayer money the government has spent thus far to prop up the firms.