Banking giant JPMorgan Chase has reached a tentative agreement to pay a record $13 billion fine to the Justice Department to settle probes into its residential mortgage-backed securities, US media reported.
Citing sources familiar with the decision, The Wall Street Journal newspaper reported in its online edition Saturday that the deal was hashed out during a phone call Friday with US Attorney General Eric Holder, his deputy Tony West and JPMorgan’s top lawyer Stephen Cutler.
The New York Times and the Washington Post, which also reported on the tentative agreement, said that JPMorgan Chase CEO Jamie Dimon participated in the talks with Holder.
If the amount is confirmed, it would be the largest ever paid by a US company in this type of settlement with the government, well over half the bank’s earnings last year of $21.3 billion. It’s also significantly larger than JPMorgan’s previous offer of $11 billion.
However, the two sides still disagree over an admission of wrongdoing that would end the probe. US companies often try to make financial settlements without admitting fault.
And the still-tentative deal wouldn’t resolve a criminal investigation into the bank’s activities being conducted by a court in Sacramento, California, the Journal said.
The US Attorney’s Office for the Eastern District of California accuses the bank of having “violated certain federal securities laws” in connection with the subprime mortgage-backed securities offered over 2005-2007
That was before JPMorgan bought failing banks Bear Stearns and Washington Mutual in 2008, at the height of the financial crisis.
That case could result in charges against individuals, and could increase the fine for JPMorgan Chase.
If finalized, $4 billion would settle allegations by the Federal Housing Finance Agency, a mortgage regulator, that JPMorgan overstated the quality of the mortgages it sold on to the government-sponsored housing finance enterprises Fannie Mae and Freddie Mac.
In that case, filed in 2011, the FHFA accuses JPMorgan of having sold $33 billion worth of subprime loans to Fannie and Freddie, while concealing that the loans were in fact issued to insolvent borrowers.
Another $4 billion would be destined for consumer relief, and $5 billion would be paid in penalties, the Journal reported.
Although details are still being worked out, the agreement would also resolve a separate lawsuit filed by New York’s Attorney General Eric Schneiderman.
JPMorgan, the largest US bank by assets, has been under investigation by several US regulatory agencies.
Known for opposing any effort to tighten regulations on banks, Dimon has had to make it a priority to increase its internal controls and resolve ever more costly litigation against the bank, once Wall Street’s poster child.
It recently agreed to pay more than $1 billion in fines over the “London whale” trading debacle of 2012.
And the bank just reported its first quarterly loss in nearly 10 years, a net loss of $380 million on revenues of $23.12 billion, due in large part to a $9.15 billion charge for legal expenses.