Sunday 19 January 2020

JP Morgan strikes $13bn deal over mis-selling of toxic mortgage debt

Philip Aldrick

JP MORGAN, America's biggest bank, has reached a $13bn (€9.5bn) deal with US regulators to settle claims that it mis-sold bundles of toxic mortgage debt to investors in the build-up to the financial crisis.

The settlement, which has yet to be made official, is part of a broader investigation by the US authorities into the industry's mortgage activities in the years before the 2008 panic.

Banks are alleged to have lied about the quality of the sub-prime mortgage securities sold to investors.

The JP Morgan settlement – the largest yet by a US company with the government – is expected to resolve civil claims against the bank but will still leave it open to criminal charges.

Of the $13bn, around $9bn (€6.5bn) is expected to cover fines or penalties and $4bn (€3bn) will go to consumer relief for struggling homeowners. The final cost to JP Morgan, the largest US bank by assets, could yet rise. A criminal investigation into its mortgage-selling activities in Sacramento, California, is ongoing.

The size of the civil settlement deals another damaging blow to the reputation of both the bank and its chief executive Jamie Dimon.

Having survived the crisis relatively unscathed, Mr Dimon was lauded for his risk management.

More recently, though, the bank has been hit with a series of fines – including a $1bn penalty for failings that resulted in $6.2bn of losses from unauthorised trades. Earlier this month, JP Morgan disclosed that it had set aside $23bn (€16.8bn) for settlements.

The latest deal was reportedly thrashed out on a call between Mr Dimon and US Attorney General Eric Holder. Mr Dimon had offered $11bn and was asking for a "non-prosecution agreement". However, on Friday night, he accepted the higher sum and dropped his main condition. (© Daily Telegraph, London)

Irish Independent

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