Dec 9 A Republican member of the U.S. Securities
and Exchange Commission blasted other government regulators on
Monday for requiring JPMorgan Chase & Co to pay $13 billion to
resolve allegations of mortgage misdeeds tied to the financial
"I think you would be hard-pressed to find any rational
regulatory policy that would underlie a $13 billion penalty
against shareholders," said SEC member Dan Gallagher, a
Last month JPMorgan agreed to pay $13 billion to resolve
claims from the Justice Department, a federal housing regulator,
and others, that the bank overstated the quality of mortgages it
was selling to investors in the run-up to the financial crisis.
The SEC was not a party to the settlement, which included $9
billion in cash and the rest as help to consumers.
The Justice Department rolled several separate
investigations and lawsuits into one large settlement, and said
such a deal was designed to hold wrongdoers accountable for
misconduct that contributed to the crisis.
The cost of the settlement forced JPMorgan to record its
first quarterly loss under CEO Jamie Dimon and was expected to
cost JPMorgan $9 billion after tax, a little less than half the
company's annual profit of $21 billion in 2012.
JPMorgan in a statement of facts acknowledged problems in
its marketing of mortgage securities.
But the Justice Department did not release details of how it
calculated the penalty, and did not release a complaint that
laid out the entire scope of the misconduct government
investigators had unearthed.
In an interview with Reuters last week, Attorney General
Eric Holder defended the size of the fines. "What we have looked
for in terms of the size of these things is really to do it in a
way that's appropriate, that's proportionate," he said.
"There is a mathematical basis to the offers that we make,"
he said. "It's not something that we simply look at the size of
the institution or their balance sheet," Holder added.
When announcing the deal, the Justice Department described
it as the "largest settlement with a single entity in American
Holder also said in the interview that the department
planned to bring more mortgage fraud cases against other
financial institutions early in 2014.
Soon after the settlement, JPMorgan's general counsel
Stephen Cutler criticized the large penalty imposed and
described it as contributing to something of an arms race in
Speaking before an audience in Frankfurt at an event
organized by the American Chamber of Commerce in Germany,
Gallagher blamed that escalation on government lawyers looking
to build a reputation.
"One of the ... problems we have in the United States is
that prosecutors like to make a name for themselves and they all
try to distinguish themselves in one way or another," he said.
"One way to distinguish yourself is to get the highest
penalty ever against a bank ... I don't think it bears much
resemblance to anything else. It is not rational," he said.