Big bank and Feds find talks at a standstill

by Ryan Smith14 Oct 2013

JPMorgan Chase & Co. and the Department of Justice are still at loggerheads over a potential multibillion-dollar settlement that would resolve multiple investigations into the lending giant’s sale of mortgage bonds, according to a Wall Street Journal report.

Citing unnamed sources “close to the talks,” the Journal reported Friday that although negotiations continue between the bank and the government, several issues are hobbling the potential $11bn agreement, including the number of federal agencies that would participate in the deal, whether JPMorgan would face further liability and whether the bank would admit to wrongdoing, the Journal reported.

The ongoing government shutdown has also thrown a spanner in the works, since DOJ shutdown guidelines specify that no action be taken on civil litigation unless ordered by a judge, according to the Journal.

If the settlement talks collapse, the government could file a civil suit against JPMorgan and continue a criminal investigation into the lender’s sale of mortgage-backed securities. The Justice Department says it’s uncovered documents that indicate the bank was well aware that it was foisting shoddy loans onto unknowing investors, according to the Journal. One such document was an email from a JPMorgan employee to her superiors warning them that they were grossly exaggerating the quality of mortgages being bundled into securities. Despite the employee’s warning, the bank allegedly securitized the mortgages.

Between 2008 and 2012, JPMorgan spent $17.7bn on litigation alone, and is currently facing more regulatory enforcement actions than any other U.S. bank, as well as at least seven separate Justice Department investigations.