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JPMorgan Chase Will Pay $13 Billion In Record Settlement

In a settlement deal, JPMorgan Chase has agreed to pay some $13 billion in fines and other payments related to mortgages and mortgage securities that helped cause the financial crisis that began in 2007.

In a settlement deal, JPMorgan Chase has agreed to pay some $13 billion in fines and other payments related to mortgages and mortgage securities that helped cause the financial crisis that began in 2007. (Mark Lennihan/AP)

In an agreement settling many U.S. claims over its sale of troubled mortgages, JPMorgan Chase will pay a record $13 billion, in a deal announced by the Justice Department Tuesday.

The plan includes a $4 billion payment for consumer relief, along with a payment to investors of more than $6 billion and a large fine.

"The settlement does not absolve JPMorgan or its employees from facing any possible criminal charges," the Justice Department says.

At $13 billion, the JPMorgan settlement is a record amount paid by one corporation to the federal government. The figure is nearly triple the $4.5 billion in fines and penalties paid by BP over the 2010 Gulf of Mexico oil spill (the BP figure doesn't include restitution and other claims made by individuals and businesses, a process that is ongoing).

The historic deal has been negotiated for months, as JPMorgan and government officials looked for a satisfactory end to a string of lawsuits and investigations stemming from the financial crisis that began in 2007. The Department of Housing and Urban Development also took part in the talks, as did several states.

In announcing the deal, officials detailed how the money would be divided. Part of the $4 billion for consumers would go toward helping some homeowners whose mortgages are handled by JPMorgan. In a rare step, another share would be used to reduce blight in neighborhoods peppered by rundown and abandoned homes.

The pact requires JPMorgan to hire an independent auditor to ensure it follows those guidelines.

"The settlement does not absolve JPMorgan or its employees from facing any possible criminal charges," the Justice Department says.

At $13 billion, the JPMorgan settlement is a record amount paid by one corporation to the federal government. The figure is nearly triple the $4.5 billion in fines and penalties paid by BP over the 2010 Gulf of Mexico oil spill (the BP figure doesn't include restitution and other claims made by individuals and businesses, a process that is ongoing).

The historic deal has been negotiated for months, as JPMorgan and government officials looked for a satisfactory end to a string of lawsuits and investigations stemming from the financial crisis that began in 2007. The Department of Housing and Urban Development also took part in the talks, as did several states.

In announcing the deal, officials detailed how the money would be divided. Part of the $4 billion for consumers would go toward helping some homeowners whose mortgages are handled by JPMorgan. In a rare step, another share would be used to reduce blight in neighborhoods peppered by rundown and abandoned homes.

The pact requires JPMorgan to hire an independent auditor to ensure it follows those guidelines.

The settlement stems from "alleged bad behavior relating to mortgages and mortgage-backed bonds," as Marketplace reports. "These were pumped into the financial markets before the housing bubble burst — both by J.P. Morgan Chase, and by Washington Mutual, the failing savings-and-loan that J.P. Morgan bought with government encouragement in the midst of the financial crisis."

Recalling those events, the Federal Housing Finance Agency's acting inspector general, Michael P. Stephens, says in the official news release, "JPMorgan and the banks it bought securitized billions of dollars of defective mortgages. Investors, including Fannie Mae and Freddie Mac, suffered enormous losses by purchasing [residential mortgage-backed securities] from JPMorgan, Washington Mutual and Bear Stearns not knowing about those defects.

JPMorgan remains a potential target of several legal actions. It is still is being investigated by the U.S. Attorney's office in Sacramento. Private investors and European banks may also file claims against the company.

"Also, U.S. officials can pursue charges against some of the individuals who were involved in mortgage fraud, and they've said they might do that," NPR's Jim Zarroli told Renee Montagne on Tuesday's Morning Edition.

Update at 3:45 p.m. ET: Details On The Payout

The Justice Department has issued this breakdown of the $9 billion in the settlement that's not tied to consumer aid:

  • $2 billion - civil penalty to settle the Justice Department claims under the Financial Institutions Reform, Recovery, and Enforcement Act
  • $1.4 billion - to settle federal and state securities claims by the National Credit Union Administration
  • $515.4 million - to settle federal and state securities claims by the Federal Deposit Insurance Corporation
  • $4 billion - to settle federal and state claims by the Federal Housing Finance Agency
  • $298.9 million - to settle claims by the State of California
  • $19.7 million - to settle claims by the State of Delaware
  • $100 million - to settle claims by the State of Illinois
  • $34.4 million - to settle claims by the Commonwealth of Massachusetts
  • $613.8 million - to settle claims by the State of New York
Categories: Business, Economics, Law