Oct 21, 2013

    JPMorgan close to $16b settlement

    JPMORGAN Chase has agreed tentatively to pay US$13 billion (S$16 billion) to settle allegations surrounding the quality of mortgage-backed securities that it sold in the run-up to the 2008 financial crisis, a person familiar with the negotiations between the bank and the United States federal government said on Saturday.

    If the agreement is finalised, it would be the government's highest-profile enforcement action related to the financial meltdown that plunged the economy into the deepest recession since the Great Depression of the 1930s.

    The tentative pact with the Department of Justice increased from an US$11-billion proposal last month, and would also mark the largest amount paid by a financial firm in a settlement with the US.

    The person, who spoke on condition of anonymity because the deal has not been finalised, said that Attorney-General Eric Holder, Associate Attorney-General Tony West, JPMorgan CEO Jamie Dimon and the bank's general counsel, Mr Stephen Cutler, negotiated the settlement in a Friday-night phone call.

    He said the agreement does not resolve a criminal investigation of the bank's conduct. That case is being handled by federal prosecutors in Sacramento, California.

    On Friday night, Mr Holder told the bank that a non-prosecution agreement was a non-starter - meaning that the Justice Department will continue to conduct the criminal investigation into the financial institution, said the person.

    As part of the deal, the Justice Department expects JPMorgan to cooperate with the continuing criminal probe of the bank's issuance of mortgage-backed securities between 2005 and 2007, he said.

    JPMorgan spokesman Brian Marchiony and Justice Department spokesman Brian Fallon declined to comment.

    Of the US$13 billion, US$9 billion will constitute fines or penalties and US$4 billion will go to consumer relief for struggling homeowners, the source said.