By Aruna Viswanatha, Emily Flitter and David Henry
NEW YORK, Sept 24 JPMorgan Chase & Co,
facing several investigations into its mortgage practices, is
seeking a global settlement with U.S. government authorities in
multiple jurisdictions, a person familiar with the matter said
Negotiations have resumed with the U.S. Department of
Justice after federal prosecutors in California delayed a plan
to file a lawsuit there on Tuesday.
The global settlement would cover probes of JPMorgan's
mortgage business, as well as investigations of similar
operations it inherited from other banks during the financial
crisis. The investigations include civil and criminal
authorities from the DOJ.
The California case involved the sale of bonds backed by
subprime mortgages and other risky home loans between 2005 and
The California negotiations initially broke down over the
amount the bank would pay as a penalty, sources said.
Meanwhile, the Department of Housing and Urban Development
took issue on Tuesday with a report in another publication that
the agency was seeking a $20 billion settlement from the bank
over its mortgage practices. The housing agency said that was
"The department takes the allegations against JPMorgan Chase
seriously and has been involved in multi-party negotiations to
reach a settlement. However, no one at this agency - including
the secretary - ever floated a $20 billion settlement figure,"
HUD general counsel Helen Kanovsky said.
The planned California litigation did not involve HUD, and
that agency's involvement in the talks suggest that both the
bank and the government want to resolve multiple investigations
in a larger settlement, according to people familiar with the
Experts said the new move toward settlement talks appeared
to be driven by a strong desire within the bank to move past its
legal troubles as quickly as possible, but the Justice
Department likely has the upper hand in the talks, given how
close it came to filing the suit.
In a regulatory filing in August, JPMorgan disclosed it was
under parallel civil and criminal investigations by federal
authorities in California and that the authorities on the civil
side told the bank in May they had preliminarily concluded it
violated federal securities laws.
To observers, another legal battle is the last thing the
largest U.S. bank needs as it struggles to move past conflicts
with regulators and prosecutors involving several business
"The way I see this, JPMorgan would like to avoid the
continuing Chinese water torture of reputational damage they've
been suffering," said Kathleen Wailes, senior vice president at
LEVICK, a public relations and crisis-management firm in
"They would like to dispose of this in a settlement as
opposed to a trial and get rid of this as quickly as they can to
move on the more positive subjects," Wailes said.
On Thursday, JPMorgan agreed to pay $1 billion to settle
regulatory actions related to a $6.2 billion trading loss it
incurred last year in its Chief Investment Office and to
allegations of wrongful billing of credit-card customers.
Last week's settlements were part of a new push by the bank
to try to remake its public image into one displaying more
deference toward regulators.
"The government is attacking very weak prey now," said
Jonathan Macey, a corporate law professor at Yale Law School.
"I certainly don't think we can say JPMorgan is in a strong
position because they've experienced such a relentless onslaught
of legal and regulatory actions."
However, JPMorgan is financially strong and making record
profits, despite the damage to its reputation, the expense of
about $5 billion in annual legal costs, and government orders to
fix its risk controls and legal compliance systems.
The company reported net income of $21.3 billion last year
and analysts expect profits this year to be even higher.
JPMorgan's stock price on Tuesday was about 25 percent
higher than before it disclosed in May 2012 that it was losing
billions of dollars on its Chief Investment Offices' "London
Whale" derivatives trade.
Chief Executive Officer Jamie Dimon said in a statement
issued by the company on Thursday: "We have accepted
responsibility and acknowledged our mistakes from the start, and
we have learned from them and worked to fix them."