JPMorgan Chase has reached a tentative agreement with the Justice Department to pay $13 billion to resolve allegations that it knowingly sold faulty mortgage securities during the financial crisis, a person familiar with the talks said Saturday.
The deal would represent the largest penalty ever paid by a single company but would leave the nation’s largest bank open to criminal prosecution. It would also represent a tremendous win for the government after years of public criticism over its struggle to hold Wall Street accountable for crisis-era misdeeds.
JPMorgan and the Justice Department have been negotiating a potential deal for months, but talks heated up a few weeks ago and eventually included direct discussions between the bank’s chief executive, Jaime Dimon, and Attorney General Eric H. Holder Jr. JPMorgan had offered to settle the investigations for $11 billion but was rebuffed.
The deal could be finalized in a couple of days, according to a person familiar with the negotiations who was not authorized to speak publicly. Justice and JPMorgan are hammering out the final details, including a statement listing what the company did wrong.
Officials at JPMorgan and Justice declined to comment.
JPMorgan had fought to secure a waiver from criminal investigations, but Justice officials refused, the person said.
“JP Morgan had been trying to get amnesty for criminal prosecution,” the person familiar with the negotiations said. But Holder, in a phone call a week ago with Dimon told him “that was a nonstarter,” the person said.
On Monday, Justice’s position was reiterated by Associate Attorney General Tony West to the bank’s General Counsel Stephen Cutler. The next day, JPMorgan officials told its board of directors that Justice was not willing to give the company a criminal release, the person said.
Dimon called Holder on Thursday with the new offer. By Friday, JPMorgan officials said they would agree to the civil settlement during a call between Dimon, Cutler, West and Holder.
The criminal investigations will go forward, said the person familiar with the negotiations.
Talks have been ongoing for months but began to heat up this week as federal prosecutors in California were preparing to announce civil charges against JPMorgan related the sale of mortgage-backed securities between 2005 and 2007.
The full scope of the deal remains unclear, but people with knowledge of the negotiations said it would include $4 billion in relief to consumers, including write downs on mortgages.
Another $4 billion would go to the Federal Housing Finance Agency over mortgage securities sold by Bear Stearns and Washington Mutual— companies that JPMorgan purchased in 2008. The securities in contention were bought by mortgage finance companies Fannie Mae and Freddie Mac, which are overseen by the FHFA and cost taxpayers $188 billion to save.
The deal would also end the California probe as well as a separate lawsuit filed by New York Attorney General Eric Schneiderman in October over shoddy mortgage securities.
The deal would represent the largest penalty ever paid by a single company but would leave the nation’s largest bank open to criminal prosecution. It would also represent a tremendous win for the government after years of public criticism over its struggle to hold Wall Street accountable for crisis-era misdeeds.
JPMorgan and the Justice Department have been negotiating a potential deal for months, but talks heated up a few weeks ago and eventually included direct discussions between the bank’s chief executive, Jaime Dimon, and Attorney General Eric H. Holder Jr. JPMorgan had offered to settle the investigations for $11 billion but was rebuffed.
The deal could be finalized in a couple of days, according to a person familiar with the negotiations who was not authorized to speak publicly. Justice and JPMorgan are hammering out the final details, including a statement listing what the company did wrong.
Officials at JPMorgan and Justice declined to comment.
JPMorgan had fought to secure a waiver from criminal investigations, but Justice officials refused, the person said.
“JP Morgan had been trying to get amnesty for criminal prosecution,” the person familiar with the negotiations said. But Holder, in a phone call a week ago with Dimon told him “that was a nonstarter,” the person said.
On Monday, Justice’s position was reiterated by Associate Attorney General Tony West to the bank’s General Counsel Stephen Cutler. The next day, JPMorgan officials told its board of directors that Justice was not willing to give the company a criminal release, the person said.
Dimon called Holder on Thursday with the new offer. By Friday, JPMorgan officials said they would agree to the civil settlement during a call between Dimon, Cutler, West and Holder.
The criminal investigations will go forward, said the person familiar with the negotiations.
Talks have been ongoing for months but began to heat up this week as federal prosecutors in California were preparing to announce civil charges against JPMorgan related the sale of mortgage-backed securities between 2005 and 2007.
The full scope of the deal remains unclear, but people with knowledge of the negotiations said it would include $4 billion in relief to consumers, including write downs on mortgages.
Another $4 billion would go to the Federal Housing Finance Agency over mortgage securities sold by Bear Stearns and Washington Mutual— companies that JPMorgan purchased in 2008. The securities in contention were bought by mortgage finance companies Fannie Mae and Freddie Mac, which are overseen by the FHFA and cost taxpayers $188 billion to save.
The deal would also end the California probe as well as a separate lawsuit filed by New York Attorney General Eric Schneiderman in October over shoddy mortgage securities.