Finally, after weeks of suspense and speculation, JPMorgan Chase and the Department of Justice have announced they’ve settled their differences over the bank’s sale of mortgage securities that went bad during the financial crisis.
The difference is about $13 billion. For that sum—the largest fine of its kind ever paid to the U.S. government by a company—the bank gets resolution of federal and state investigations under way in five states, according to Bloomberg News, as well as a lawsuit filed by the Federal Housing Finance Agency. Four billion of the total will go to help homeowners who are struggling with their mortgage payments, targeted at cities such as Detroit that were especially affected by the housing collapse. As part of that amount, the bank will agree to reduce balances on mortgages in struggling areas, reduce interest rates on others, and get credit for helping to reduce urban decay by taking down abandoned homes, among other things. The bank will hire an independent monitor to oversee the disbursement of the homeowner relief, reported the New York Times.
In other words, JPMorgan will pay an amount equal to more than half the bank’s income last year to be able to say that all pre-financial-crisis mortgage stuff is behind it. It will also enjoy the public-relations benefit of showing that it’s taking steps to help people who were hurt by questionable mortgage dealings on Wall Street.
What it will not get is a break from all the other government investigations into other areas of JPMorgan’s business, including its hiring practices in China, its interactions with convicted Ponzi scheme operator Bernie Madoff, and its trading in energy markets.
The government, though, will get something significant: It will finally be able to say that it drew blood over the abuses that led to the 2008 financial meltdown. That blood, however, will be drawn from the shareholders of the company, not the executives who steered it into trouble.