After months of grappling, JPMorgan Chase & Co. and the U.S. Justice Department have reached a $13-billion settlement – the largest single sum a company has ever paid to the U.S. government.
The settlement, reached Tuesday, resolves several state and federal investigations into JPMorgan’s sale of mortgage securities to pension funds, and other investors between 2005 and 2008 – a practice linked directly to the financial crisis, when the U.S. economy reached its lowest levels since the Great Depression.
The bank – accused by the government of not disclosing the risks of buying these securities – will be required to pay out $2 billion to Sacramento prosecutors, $4 billion to destitute homeowners in Detroit and New York neighbourhoods and $7 billion to hard-hit investors. The largest recipient, Federal Housing Finance Agency, which oversees Fannie Mae and Freddie Mac, will receive $4 billion, while the remaining amount will be divvied out to a credit union association, state attorney generals in California and New York, and the Justice Department’s civil division.
In addition to the settlement, JPMorgan acknowledged a statement outlining the bank’s misconduct, withdrew its demand that prosecutors drop another criminal investigation into the bank and waved its right to try an recoup the $13 billion from the Federal Deposit Insurance Corporation at a later date.
The enormity of the settlement shows how serious the Justice Department is in holding Wall Street accountable, while perhaps signaling to other major banks with cases against them of what’s to come.