Who Really Wins if JPMorgan Pays $13 Billion?
By Jonathan Weil Oct 20, 2013 11:41 PM GMT+0800
Looks like Jamie Dimon is moving ahead. Photographer: Joshua Prezant/Bloomberg
Memories of the fictional sports announcer Biff Burns came to mind this weekend amid all of the anonymously attributed news reports that the Justice Department had reached a tentative settlement agreement with JPMorgan Chase & Co. worth $13 billion.
Burns was part of the comedian George Carlin’s stable of characters. His shtick was to report the day’s scores while omitting basic information. (“Here’s a partial score: Pittsburgh 37.” Or, “Quickly now the basketball scores: 110 to 102, 125 to 113, 131 to 127.”) Likewise, it has been widely reported that the $13 billion settlement would be the largest ever by the government with a single company. Yet we still don’t have enough facts to know which side would emerge the real winner.
It probably would be a stretch to give the Justice Department credit for the full $13 billion. The matters JPMorgan would be resolving include a 2011 lawsuit by the conservator for Fannie Mae and Freddie Mac, as well as a separate suit by New York Attorney General Eric Schneiderman. It also isn’t clear how much of the $13 billion would be paid in cash. (JPMorgan had $28.9 billion of pretax income last year.)
About $4 billion would be earmarked for consumer relief, details of which are fuzzy. For all we know this could take the form of coupons, discounts or other soft benefits, which might not cost JPMorgan anywhere near $4 billion in the end. This month the Association of Mortgage Investors sent U.S. Attorney General Eric Holder a letter to complain that some of the government’s settlements with large banks “have resulted in the responsible party shifting a portion of the settlement costs” to investors in residential mortgage-backed securities. If the government lets JPMorgan finance breaks for homeowners with other people’s money rather than its own, that isn’t much punishment.
Another $4 billion would go toward resolving the lawsuit related to Fannie and Freddie. For the Justice Department to include this accord in its total settlement figure would be akin to the rooster taking credit for the dawn. The suit isn’t a law-enforcement matter. It’s a business dispute.
Back in 2011 the Federal Housing Finance Agency, which is the conservator for Fannie and Freddie, hired the law firm Quinn Emanuel Urquhart & Sullivan LLP to litigate the two companies’ mortgage-bond claims against JPMorgan and other large banks. The agency’s lawsuit covers $33 billion of residential mortgage-backed securities issued from 2005 to 2007 that Fannie and Freddie brought from JPMorgan and other companies it later acquired, including Washington Mutual and Bear Stearns.
In court papers, Quinn Emanuel attorneys have said Fannie and Freddie lost billions of dollars on those bonds, without specifying more precisely. Perhaps $4 billion (before attorneys’ fees) is a good deal for Fannie and Freddie. Or maybe it’s an even better bargain for JPMorgan, at about 12 percent of the bonds’ face value. It’s hard to say.
The settlement wouldn’t end the Justice Department’s criminal investigation of JPMorgan. The bank was told it won’t receive a waiver from prosecution, and would have to cooperate with the Justice Department’s probes of individuals still under investigation.
This brings me to another quirk in the Fannie-Freddie portion of the settlement. The Federal Housing Finance Agency’s amended complaint against JPMorgan also named 32 individuals as defendants, all of whom worked for JPMorgan or one of the companies it later acquired. If the agency settles the case with JPMorgan and collects its $4 billion on behalf of Fannie and Freddie, it wouldn’t make much sense financially to continue pressing claims against the individuals; whatever sums it could collect from them would be immaterial by comparison.
It isn’t clear if any of those people are under investigation by the Justice Department. JPMorgan hasn’t disclosed which mortgage bonds are the focus of the criminal probe or whether they include any of the bonds sold to Fannie or Freddie. That said, the housing-finance agency did allege that JPMorgan and the individual defendants violated federal securities laws. Unveiling a massive settlement without holding any individuals responsible would be unsatisfying. By now, though, the public has come to expect such outcomes as the norm.
All of this is a long way of saying there is still much we don’t know about the Justice Department’s investigations and how the various settlements will turn out. JPMorgan wants peace with the government concerning all of its mortgage-bond woes. The Justice Department wants to show it’s capable of holding a large bank accountable for violations of the law. Yet it's unlikely either side won a total victory -- the question is whether the deal will deter misconduct by banks in the future.
Source: http://www.bloomberg.com/news/2013-10-20/who-really-wins-if-jpmorgan-pays-13-billion-.html
Major JPMorgan Chase settlements and fines
Past fines and settlements paid by JPMorgan Chase since mid-2010.
Here's a list of what the fines and settlements have cost JPMorgan Chase to date in the fallout of the 2008 financial crisis, not including the tentative settlement reached with the Justice Department Saturday of $13 billion:
Oct. 2013: $100 million: Agreed to pay a $100 million fine and admit to reckless conduct and market manipulation in connection with its 2012 "London whale" trading debacle, the Commodity Futures Trading Commission announced.
Sept. 2013: $920 million – Paid to the Federal Reserve, Securities and Exchange Commission, Office of Comptroller of the Currency and the United Kingdom's Financial Conduct Authority to settle claims about management and oversight of traders involved in the "London Whale" disaster. The bank also admitted wrongdoing in the trading episode, which caused roughly $6 billion in losses.
REPORTS: JPMorgan strikes tentative $13B mortgages settlement
Sept. 2013: $389 million – A total of $80 million in fines paid plus $309 million in refunds after regulators charged that more than 2.1 consumers were harmed by unfair billing practices that charged for credit monitoring services they did not receive. The settlement also covered allegations that consumers were harmed by mistakes in thousands of debt-collection lawsuits.
July 2013: $410 million – Penalties and repayments related to Federal Energy Regulatory Commission findings of alleged bidding manipulation of California and Midwest electricity markets from Sept. 2010 through Nov. 2012.
January 2013 and Feb. 2012: $1.8 billion – Two agreements in which JPMorgan joined other major banks in a nationwide settlement over allegations the institutions improperly carried out home foreclosures after the housing market crisis. JPMorgan also agreed to $3.7 billion for financially troubled homeowners and roughly $540 million in refinancing.
November 2012: $296.9 million – Paid to settle SEC allegations that the bank misstated information about the delinquency status of mortgages that served as financial collateral for a securities offering underwritten by the bank. JPMorgan received more than $2.7 million in fees on the offering, while investors sustained at least $37 million in losses.
August 2012: $1.2 billion – The bank's share of a broad settlement resolving a class-action lawsuits that alleged JPMorgan, other banks, Visa and Mastercard improperly conspired to set the price of credit and debit card interchange fees.
April 2012: $20 million – Paid to settle Commodity Futures Trading Commission allegations that the bank improperly extended credit to Lehman Brothers based in part on customer funds that were required to be kept separate.
August 2011: $88.3 million – Fines settling allegations by the Treasury Department's Office of Foreign Assets Control that the bank improperly processed transactions involving Cuba, Iran and Sudan.
July 2011: $228 million – Settling SEC allegations that the bank fraudulently rigged at least 93 municipal bond transactions in 31 states, generating millions of dollars in ill-gotten gains.
June 2011: $153.6 million – Penalties to the SEC in settling allegations that the bank misled investors about a collateralized debt obligation it marketed without telling them a hedge fund chosen the underlying collateral and made investment bets it would fail.
April 2011: $56 million – Paid to settle claims the bank overcharged active-duty service members on their mortgages. The agreement included $27 million in cash to approximately 6,000 military personnel, lower interest rates on soldiers' home loans and the return of homes taken in improper foreclosures.
June 2010: $48.6 million – Fine paid to settle allegations by Great Britain's financial regulator that the bank's London unit failed to maintain required separation between clients' accounts and JPMorgan funds.
— Kevin McCoy, USA TODAY. Sources: News releases by regulatory agencies, bank regulatory filings and USA TODAY research.
Source: http://www.usatoday.com/story/money/business/2013/10/19/jpmorgan-chase-major-settlements/2901501/
小摩遭罰130億美元美史上最重
工商時報 ／綜合外電報導 2013年10月21日 04:09
摩根大通因涉及不當銷售房貸擔保券，遭美司法部指控，雙方達初步和解，摩根大通將償付130億美元。圖／美聯社
美司法部主要和解案與罰金
美國最大銀行摩根大通（小摩）針對司法部指控其不當銷售房貸擔保證券，間接引爆次貸風暴與金融危機，已初步達成和解，小摩必須支付130億美元（約新台幣3,800億元）的和解金，相當該公司去年獲利一半以上，是司法部針對單一公司歷來最高罰金紀錄。
司法部主要是針對小摩在2005年到2007年間美國房市泡沫期間，以次級房貸包裝成房貸擔保證券，出售給包括聯邦兩大房貸機構房利美與房地美在內的投資人，然而不但未據實說明其中的風險，反而還誇大產品品質，導致市場風險大增，間接引爆金融風暴。
在這130億美元和解金中，有40億美元是為因應投資人求償、90億美元是司法部的罰款，其中包括40億美元賠償房地美與房利美的損失。
不過此一和解僅代表小摩在不當銷售房貸擔保證券的民事責任。小摩仍須面對加州的刑事調查。
此一和解仍在初步階段，關鍵在於小摩是否願意承認司法部所有的指控。
專家指出，此點非常重要，因為小摩的承認也就代表華爾街其他業者可能也須被迫承其不當行為。
對於小摩來說，此案不僅代表要支付巨額和解金，也意味該銀行與執行長迪蒙的聲譽大受損傷。
迪蒙在美房市泡沫破滅後帶領公司安然度過金融風暴，並且接收瀕臨破產的證券業者貝爾史登與房業者華盛頓互助公司，因而備受推崇。然而，近年來小摩與迪蒙卻是迭受打擊，例如去年在倫敦的60億美元交易損失、在中國大搞裙帶關係等。
對於美司法部而言，此案有助洗刷對華爾街大型業者太過軟弱的污名，同時也突顯歐巴馬政府打擊華爾街業者不當行為的努力，有助提升歐巴馬政府的聲望。
不過仍有若干公益團體不滿政府為何沒有對華爾街業者的高級主管提起刑事訴訟。
130億美元的和解金若是獲得通過，將是華爾街業者最大和解金額，也是司法部針對單一公司歷來最大罰金。
包括匯豐集團去年因洗錢案被處以19億美元罰金，以及石油巨擘BP在墨西哥灣漏油案的45億美元。
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