Just two weeks after having paid the third-largest fine ever imposed on an American bank, JPMorgan Chase is likely going to have to open its wallet again. Chase is in talks with multiple federal and state agencies to resolve litigation over its sale of mortgage-backed securities during the financial crisis. While the final price tag is still up in the air, Chase may have to pay as much as $7 billion when all is said and done.
During settlement talks this week, proposals emerged that would require JPMorgan to pay anywhere from $3 billion to about $7 billion, people briefed on the negotiations said. The settlement, the people said, might also require JPMorgan to provide some financial relief for struggling homeowners. Although the ultimate amount is still in flux, it is clear that any deal would dwarf the size of other settlements the bank has reached to resolve separate regulatory issues.
The talks, which involve the Justice Department, the Department of Housing and Urban Development and the New York attorney general’s office, continued on Tuesday without resulting in a final deal. The people briefed on the negotiations, who were not authorized to speak publicly, cautioned that terms were shifting and that the talks could fall apart.
Aside from negotiating the size of a financial fine, the people said, the talks are centered on which investigations and pending lawsuits to sweep into the potentially wide-ranging settlement. The pact could resolve investigations led by a specialized group at the Justice Department focused on mortgage securities cases. It could also include lawsuits filed by Eric T. Schneiderman, the New York attorney general, and the Federal Housing Finance Agency. The agency is focused on mortgage securities that JPMorgan sold to Fannie Mae and Freddie Mac, the government-controlled housing finance giants.
One sign of how far along talks seem to be going--apparently a civil suit by federal prosecutors in Sacramento is on hold. That suit was due to be filed as early as yesterday, but it may be part of the broader settlement.
The New York Times first revealed that Chase is in settlement talks shortly after the close of business yesterday. Initial reports suggested that Chase might have to pay as much as $20 billion. While that figure seems to have come way down, it will still make the $920 million it paid last week to several US and UK authorities look like a rounding error.
No matter how big the settlement is, though, it won't mean a thing unless Chase is actually required to publicly admit it broke the law. And it also won't mean a thing unless those responsible are required to leave the bank if they haven't done so already. Hopefully it won't absolve individual officers from criminal liability either. After all, this may be the best chance yet to see Wall Street execs in orange jumpsuits.