JPMorgan settles mortgage lawsuit for $13 billion

JPMorgan settlement biggest in US history!

JPMorgan Chase, the nation’s largest bank, has agreed to settle a $13-billion lawsuit brought by the government for selling shoddy mortgage investments that helped lead to the housing bubble and the nation’s financial meltdown.The bank admitted to knowingly peddling the toxic securities, an act that helped trigger a global recession.

The agreement includes $4 billion to help homeowners across the nation who were foreclosed on or who are struggling with their loans. Many of California’s troubled subprime loans were originated by Washington Mutual and a lending unit of Bear Stearns, and it was hit with 1 million foreclosures during the mortgage meltdown. The state will be a major beneficiary of the deal. California pension funds, which were big investors in mortgage securities, will receive nearly $300 million in damages to help cover losses to the retirement accounts of state employees and teachers.

JPMorgan contended government’s case was unfair

JPMorgan has long contended that the government’s case against it was unfair because many of the problem mortgage securities came from investment bank Bear Stearns Cos. and thrift Washington Mutual, institutions that JPMorgan purchased during the financial crisis at the urging of the federal government.

JPMorgan’s chairman and chief executive, Jamie Dimon, said the bank was “pleased to have concluded this extensive agreement” that covers a “very significant portion” of the bank’s legacy mortgage problems.

For the Justice Department, it was a much-needed win that indicates the government’s tougher stance against Wall Street wrongdoing.

“Before the crisis, Big Brother was asleep on the couch,” said Mike Mayo, a banking analyst at CLSA in New York. “Now Big Brother is coming back with a vengeance.”

While the settlement did not single out any JPMorgan employees for illegal activity, the government is continuing a criminal probe of JPMorgan and its employees.

“We saw in a very graphic way the effects of the financial crisis,” said Benjamin Wagner, a U.S. attorney in Sacramento that is leading the criminal probe. “It certainly had a very negative impact in this region and damaged a lot of people in a very profound way.”

Legal experts expect U.S. prosecutors to use the settlement as a template to extract significant sums from other major banks.

Simon Resnik Hayes LLP
http://www.simonresnik.com/