[ed. See also: Reparations From Banks. I guess this is what passes for regulatory oversight and restitution these days. Despite the oddness of seeing two governmental agencies engaged in a public dispute over how hard to slap J.P's wrist, the fact remains that $13 billon in fines is no small potatoes. That alone should give pause to consider just how enormous the company's transgressions have been (and perhaps still are). I say, book 'em Dano...to the full extent of the law (and even more, were it possible).]
The concessions emerged on Friday in an agreement with one of the federal regulators suing JPMorgan, the nation’s largest bank. The regulator, the Federal Housing Finance Agency, ran ahead of a broader deal that the Justice Department and other authorities were negotiating with the bank.
The housing agency, which oversees Fannie Mae and Freddie Mac, extracted a $5.1 billion payout on Friday.
But unlike other regulators pursuing the bank, it did not require JPMorgan to admit wrongdoing. And in a provision buried in the settlement, the agency effectively allows JPMorgan to try later to recoup about $1 billion from another federal regulator: the Federal Deposit Insurance Corporation.
The results show that, even as JPMorgan is facing an onslaught from the government, the bank is seeking to contain the fallout — and is succeeding on some fronts.
In a statement, JPMorgan called the deal “an important step towards a broader resolution” with the Justice Department and the other government authorities.
And for its part, the housing agency, while not responding to questions about the wording of the agreement, also heralded the settlement. “This is a significant step as the government and JPMorgan Chase move to address outstanding mortgage-related issues,” Edward J. DeMarco, the acting director of the housing agency, said in a statement. Yet the housing agency’s announcement also suggests that the government may be split over how to punish the bank for misrepresenting the quality of mortgage securities it sold to investors before the 2008 financial crisis. The Justice Department, which has orchestrated the $13 billion settlement, is conversely demanding that JPMorgan not pass on its liabilities to the F.D.I.C.
JPMorgan has been locked in a legal battle with the F.D.I.C. over mortgage securities sold by Washington Mutual. In a deal that the F.D.I.C. orchestrated, JPMorgan bought the failed bank at the height of the financial crisis in 2008, just months after it acquired Bear Stearns. By JPMorgan’s account, the F.D.I.C. agreed that it would shoulder some liabilities from Washington Mutual. The agency disputes that notion and is fighting the bank in court.
The bank’s legal stance has now carried over into the negotiations over the $13 billion mortgage settlement.
Because the settlement deal with the housing regulator involves mortgage securities sold by Washington Mutual, JPMorgan could try to push some of the settlement cost onto the F.D.I.C. And the deal with the housing agency does not explicitly prevent the bank from doing so.
by Ben Protess and Peter Eavis, NY Times Dealbook | Read more:
Image: Mike Segar/Reuters
