Just in case you missed it while preparing for the Thanksgiving and Chanukah holidays, during mid November there were several announcements about settlements between the JP Morgan bank and various federal and state governments. This is important and cannot be over-emphasized.
The Federal Deposit Insurance Company (FDIC) announced a settlement agreement with JP Morgan bank and its affiliates. The bank will pay $515.4 million to settle charges that it misrepresented:
"... offering documents for 40 residential mortgage-backed securities (RMBS) purchased by the failed banks. The settlement funds will be distributed among the receiverships for the failed Citizens National Bank, Strategic Capital Bank, Colonial Bank, Guaranty Bank, Irwin Union Bank and Trust Company, and United Western Bank... As receiver for failed financial institutions, the FDIC may sue professionals and entities whose conduct resulted in losses to those institutions in order to maximize recoveries. From May 2012 to September 2012, the FDIC as Receiver for five of the failed banks filed ten lawsuits against JPMorgan, its affiliates, and other defendants for violations of federal and state securities laws in connection with the sale of RMBS. As of October 30, 2013, the FDIC has authorized lawsuits based on the sale of RMBS to a total of eight failed institutions and has filed 18 lawsuits seeking damages for violations of federal and state securities laws."
The Office of the California Attorney General announced a settlement agreement with the bank, requiring it to pay about $300 million in damages:
"An investigation conducted by Attorney General Harris showed that offering documents for the securities failed to accurately disclose the true characteristics of many of the underlying mortgages, and that due diligence to weed out poor quality loans had not been adequately performed. The broader settlement reached today by the United States Department of Justice and other federal and state agencies totals $13 billion, and represents the largest settlement with a single entity in American history."
A tentative agreement had been announced during October 2013. These announcements in November represented the final agreements. The U.S. Justice Department (DOJ) announced a $13 billion settlement with the bank to settle charges based on:
"... the packaging, marketing, sale and issuance of residential mortgage-backed securities (RMBS) by JPMorgan, Bear Stearns and Washington Mutual prior to Jan. 1, 2009. As part of the settlement, JPMorgan acknowledged it made serious misrepresentations to the public - including the investing public - about numerous RMBS transactions. The resolution also requires JPMorgan to provide much needed relief to underwater homeowners and potential homebuyers, including those in distressed areas of the country. The settlement does not absolve JPMorgan or its employees from facing any possible criminal charges..."
The DOJ announcement included this statement by U.S. Attorney General Eric Holder:
“Without a doubt, the conduct uncovered in this investigation helped sow the seeds of the mortgage meltdown... 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. The size and scope of this resolution should send a clear signal that the Justice Department’s financial fraud investigations are far from over. No firm, no matter how profitable, is above the law, and the passage of time is no shield from accountability."
"Mounting legal costs from government proceedings pushed JPMorgan to a rare loss in this year's third quarter... The bank reported Oct. 11 that it set aside $9.2 billion in the July-September quarter to cover the string of legal cases against the bank. JPMorgan said it has placed $23 billion in reserve to cover potential legal costs. On Nov. 15, the company announced it had reached a $4.5 billion settlement with 21 major institutional investors over mortgage-backed securities issued by JPMorgan and Bear Stearns between 2005 and 2008.."
The Office of the Massachusetts Attorney General announced a settlement agreement where the bank will pay the state about $34 million:
"The Massachusetts Attorney General’s Office, the Department of Justice and four other states entered into the agreement today. As part of the $13 billion settlement, an expected $4 billion will be set aside for consumer relief, $7 billion used to compensate investors, and $2 billion for fines..."
Theses settlements and fines are in addition a separate settlement between JP Morgan Chase Bank and the Consumer Financial Protection Bureau (CFPB). Back in September 2013, the CFPB and the Office of the Comptroller of the Currency (OCC) ordered the bank to pay $309 million in refunds to more than 2.1 million customers for:
"... illegal credit card practices. This enforcement action is the result of work started by the Office of the Comptroller of the Currency (OCC), which the CFPB joined last year. The agencies found that Chase engaged in unfair billing practices for certain credit card “add-on products” by charging consumers for credit monitoring services that they did not receive."
I look forward to reading in the future about criminal investigations related to the above mortgage asset-backed securities abuses, and about credit-card asset-backed securities by JPMorgan Chase.