JPMorgan Chase & Co, facing several investigations into its mortgage practices, is seeking a global settlement with U.S. government authorities in multiple jurisdictions, a person familiar with the matter said on Tuesday.
Negotiations have resumed with the U.S. Department of Justice after federal prosecutors in California delayed a plan to file a lawsuit there on Tuesday.
The global settlement would cover probes of JPMorgan’s mortgage business, as well as investigations of similar operations it inherited from other banks during the financial crisis. The investigations include civil and criminal authorities from the DOJ.
The California case involved the sale of bonds backed by subprime mortgages and other risky home loans between 2005 and 2007.
The California negotiations initially broke down over the amount the bank would pay as a penalty, sources said.
Meanwhile, the Department of Housing and Urban Development took issue on Tuesday with a report in another publication that the agency was seeking a $20 billion settlement from the bank over its mortgage practices. The housing agency said that was “categorically false.”
“The department takes the allegations against JPMorgan Chase seriously and has been involved in multi-party negotiations to reach a settlement. However, no one at this agency – including the secretary – ever floated a $20 billion settlement figure,” HUD general counsel Helen Kanovsky said.
The planned California litigation did not involve HUD, and that agency’s involvement in the talks suggest that both the bank and the government want to resolve multiple investigations in a larger settlement, according to people familiar with the matter.
Experts said the new move toward settlement talks appeared to be driven by a strong desire within the bank to move past its legal troubles as quickly as possible, but the Justice Department likely has the upper hand in the talks, given how close it came to filing the suit.
In a regulatory filing in August, JPMorgan disclosed it was under parallel civil and criminal investigations by federal authorities in California and that the authorities on the civil side told the bank in May they had preliminarily concluded it violated federal securities laws.
To observers, another legal battle is the last thing the largest U.S. bank needs as it struggles to move past conflicts with regulators and prosecutors involving several business lines.
“The way I see this, JPMorgan would like to avoid the continuing Chinese water torture of reputational damage they’ve been suffering,” said Kathleen Wailes, senior vice president at LEVICK, a public relations and crisis-management firm in Washington.
“They would like to dispose of this in a settlement as opposed to a trial and get rid of this as quickly as they can to move on the more positive subjects,” Wailes said.
On Thursday, JPMorgan agreed to pay $1 billion to settle regulatory actions related to a $6.2 billion trading loss it incurred last year in its Chief Investment Office and to allegations of wrongful billing of credit-card customers.
Last week’s settlements were part of a new push by the bank to try to remake its public image into one displaying more deference toward regulators.
“The government is attacking very weak prey now,” said Jonathan Macey, a corporate law professor at Yale Law School.
“I certainly don’t think we can say JPMorgan is in a strong position because they’ve experienced such a relentless onslaught of legal and regulatory actions.”
However, JPMorgan is financially strong and making record profits, despite the damage to its reputation, the expense of about $5 billion in annual legal costs, and government orders to fix its risk controls and legal compliance systems.
The company reported net income of $21.3 billion last year and analysts expect profits this year to be even higher.
JPMorgan’s stock price on Tuesday was about 25 percent higher than before it disclosed in May 2012 that it was losing billions of dollars on its Chief Investment Offices’ “London Whale” derivatives trade.
Chief Executive Officer Jamie Dimon said in a statement issued by the company on Thursday: “We have accepted responsibility and acknowledged our mistakes from the start, and we have learned from them and worked to fix them.”
Source : Reuters