Seeking Alpha

JPMorgan reaches tentative $13B settlement with DOJ

  • Struck Friday night, reports the WSJ, the deal doesn't resolve the continuing criminal probe of JPMorgan (JPM), which could result in charges against individuals or even more financial penalties against the bank. It would however, put to rest a number of federal probes as well as a separate suit by NY AG Schneidermann.
  • The settlement does include the previously-reported $4B penalty to resolve FHFA claims over mortgages sold to the GSEs prior to the financial crisis. Added to that would be another $4B in consumer relief and another $5B paid to the Feds.
  • The final deal hasn't been inked yet, and particulars, such as the final wording are still being discussed, but the general terms have been signed off on by Attorney General Holder and Jamie Dimon (as well as the JPM board).
  • The amount of $13B is more than the $11B which had been bandied about in the financial press for the past couple of weeks.
Comments (43)
  • deercreekvols
    , contributor
    Comments (5145) | Send Message
     
    For a cool $13B it will all go away...get out the checkbook, Mr. Dimon, this clears up one mess.
    19 Oct 2013, 08:16 PM Reply Like
  • geschoch
    , contributor
    Comments (5) | Send Message
     
    They (JPM) helped the government during the hard times and bought some companies and now pay a fine! The shareholders are paying the fine and thank god Jamie Dimon is still at the helm!
    20 Oct 2013, 02:54 PM Reply Like
  • bobbyd61
    , contributor
    Comments (38) | Send Message
     
    the government is outrageous. they force them to buy bear sterns and washington capital and then penelize them for what those companies did? huh? if JPMorgan draps tomorrow im buying.
    20 Oct 2013, 07:28 PM Reply Like
  • Sir. Monaco
    , contributor
    Comments (367) | Send Message
     
    deercreekvois,

     

    this kind of stuff only emboldens the G-men to rob the bank again,

     

    I would call this the largest bank robbery ever
    20 Oct 2013, 08:03 PM Reply Like
  • WisPokerGuy
    , contributor
    Comments (778) | Send Message
     
    I'm long JPM and an I guess I would be considered a supporter of Jamie Dimon, but let's not get carried away here...

     

    JPM took over Bear Sterns & Wakovia in 2008 for pennies on the dollar. Jamie Dimon and the board fully knew at the time that there was a LOT of dirty laundry buried in those companies. Even the people at Bear Sterns didn't know exactly how deep and dark that hole really was. This settlement was fully anticipated and has been funded by JPM for years. It's all the price of doing business and JPM knew it was coming eventually. That's why they currently have $23 billion on hand to settle issues like this. Basically, whenever you buy a company, you inherit their liability exposure too. Hence the lawsuit. Nothing too complicated here. And no government robbery either.

     

    The good news is that once this has been put behind the company, the path is clear for the share price to increase 15-25% within the next 12-18 months.

     

    Disclosure - very long JPM
    20 Oct 2013, 08:38 PM Reply Like
  • spinrbait
    , contributor
    Comments (341) | Send Message
     
    thats not entirely true. hank paulson was on cnbc a couple of weeks ago. paulson said he and geitner actually were begging dimon to take bear stearns. he said had jpm not taken bear sterans over the weekend, the economy would have collapsed monday morning.
    jp morgan did not have time to do due- diligence. what is happening to them now is outrageous. not only the fine, but the way people are slamming dimon, and the company. and the gov't knows it was before jpm took the company. yet they allow the defamation to continue unabased. like dick bove said. we have a tin pot dictator in charge. this is all about jamie dimon critisizing dodd frank, and supporting romney. 100%
    21 Oct 2013, 08:29 AM Reply Like
  • TomasViewPoint
    , contributor
    Comments (4845) | Send Message
     
    They can make up for this pretty fast but it is a lot of money for shareholders to give away without a trial. Would love transparency but nobody in government wants it or they would never accept the settlement.

     

    On another note $13 Billion is about 5 days worth of debt the US government is racking up.
    19 Oct 2013, 08:20 PM Reply Like
  • deercreekvols
    , contributor
    Comments (5145) | Send Message
     
    Didn't they just blame the Q3 losses on the $7B legal fund expenses?

     

    What will $13B ( with more to come? ) do to Q4 numbers?
    19 Oct 2013, 08:26 PM Reply Like
  • NITBound
    , contributor
    Comments (66) | Send Message
     
    That was in the numbers already deercreek. The legal accrual was $23b at the end of Q3.
    19 Oct 2013, 09:25 PM Reply Like
  • Morrison Marketing
    , contributor
    Comments (96) | Send Message
     
    NIT, good work. It may seem simple to see once seen, but otherwise I was thinking this would wreck their earnings and should start just thinking about what they will get in 2 quarters.
    20 Oct 2013, 01:47 PM Reply Like
  • investingInvestor
    , contributor
    Comments (1232) | Send Message
     
    In the current analysis, they are NOT too big to prosecute!

     

    The situation has evolved a lot since the 1980s. About 5 to 8 years after the US Congress frees banks from some US laws, bankers really screw up badly. First, S&Ls. Second, mortgage bankers. Third, Wall Street bankers.

     

    Maybe, Glass-Steagall will not be resurrected. Maybe, bankers will learn. Maybe, stress testing, Basel III, unwinding plans are the future of US banking. Of course, there are more intrusive approaches to systemic risk.
    19 Oct 2013, 08:29 PM Reply Like
  • TomasViewPoint
    , contributor
    Comments (4845) | Send Message
     
    investing

     

    There is no prosecution. Just the threat of it. Or worse yet the DOJ is winking at JPM and telling them to pay a fine because nobody wants to see a trial with people being named in politics or in business.

     

    I want to see a trial. Great transparency for the citizens of this country.
    20 Oct 2013, 12:31 AM Reply Like
  • American in Paris
    , contributor
    Comments (5504) | Send Message
     
    It is not a question of transparency. Trials are unpredictable.
    20 Oct 2013, 06:46 PM Reply Like
  • American in Paris
    , contributor
    Comments (5504) | Send Message
     
    You need to shed the conspiracy attitude. Instead of making vague insinuations, why don't you show us the smoking gun?

     

    Lax regulation was not the result of some back door deal. It was part of the deregulation of the finance industry.

     

    You have all the transparency you need. It is called the Congressional record.
    20 Oct 2013, 06:49 PM Reply Like
  • TomasViewPoint
    , contributor
    Comments (4845) | Send Message
     
    American

     

    Are you really that dumb? The conspiracy is happening right in front of you. This agreement is a white wash job to keep it out of court to protect a lot of people.

     

    I want to see the names of the congressmen who met with various leaders at some of these banks and encouraged more lending and encouraged looser credit. And the congressmen who took below market loans from those banks for their homes in sweetheart deals. Or borrowed money at low rates to speculate in real estate and buy rental properties disadvantaging the American public. And the names of the people at the bank and the rating agencies that intentionally were engaged in fraud. It would be good to see the government prove fraud and throw people in jail and take away their estates.

     

    You are incredibly naive if you think this has anything to do with guilt or innocence or the money. $13 billion for a government that spends that much in less than a week is a joke.
    20 Oct 2013, 07:26 PM Reply Like
  • DianeLee
    , contributor
    Comments (346) | Send Message
     
    Great points, Tomas. It'd be a shame to shine a little transparency on Chris Dodd and his Countrywide connections, Fannie Mae & Freddie Mac, wouldn't it? (just for example)
    22 Oct 2013, 11:18 AM Reply Like
  • KJP712
    , contributor
    Comments (437) | Send Message
     
    Send out checks to the citizens or the money will disappear down a rat hole.
    19 Oct 2013, 09:28 PM Reply Like
  • Tack
    , contributor
    Comments (12726) | Send Message
     
    How does this benefit the shareholders, the bank or the economy? This is just more feeding of the bottomless maw of big government. That's what these fines are always about, sanctimonious righteousness notwithstanding.
    19 Oct 2013, 10:26 PM Reply Like
  • Vaun
    , contributor
    Comments (315) | Send Message
     
    Really? Not prosecuting companies whose practices destabilized the economy is a better plan?
    20 Oct 2013, 10:31 AM Reply Like
  • Tack
    , contributor
    Comments (12726) | Send Message
     
    V:

     

    Once upon a time there was a political slogan that said "A Chicken in Every Pot." The Government's policy that led directly to the subprime crisis should have been "sloganized," too. They could have called it "Handouts for Houses."
    20 Oct 2013, 10:40 AM Reply Like
  • User 10974981
    , contributor
    Comment (1) | Send Message
     
    this penalty does not cover a fraction of the losses incurred by the average taxpayer or investor over this time period...the actions of this, and other "too big to fail" banks were bordering on the criminal and should be punished as such.
    20 Oct 2013, 11:38 AM Reply Like
  • American in Paris
    , contributor
    Comments (5504) | Send Message
     
    Tack,

     

    Clearly many of these banks broke the law. They were smart enough to know that that the toxic mortgages they were packing into bonds would result in toxic bonds. That is backed up by plenty of email and instant messages documentation.

     

    Not to disclose the true value of those bonds to potential buyers is fraud.
    20 Oct 2013, 06:52 PM Reply Like
  • Tack
    , contributor
    Comments (12726) | Send Message
     
    AIP:

     

    The commercial banks were threatened with "redlining" prosecution in many cases, if they didn't make these insane loans. They knew the credit risks were unacceptable, and that's why they wanted to syndicate the loans. But, the real culprits were the investment banks, like Goldman, and the ratings agencies, who conspired to commit the fraud in sale. In fact, further proof of this was the subsequent admission by Goldman that they were shorting the RMBS they were promoting to clients the very same time they sold it. That's pure fraud.

     

    The banks had no control over the marketing of RMBS, and, in fact, had enormous exposure, due to put-back clauses. Look who's actually lost all the money in these deals; it's the commercial banks. They wound up being the meat in the sandwich between politicians and the investment banks and rating agencies.

     

    At the bottom of the pile, various U.S. politicians should have been held accountable for this vote-buying travesty, which in its entirety is what subprime was all about.
    20 Oct 2013, 07:15 PM Reply Like
  • spinrbait
    , contributor
    Comments (341) | Send Message
     
    vaun, jpm did not do it. bear stearns and washington mutual did. thats not even in question. jp morgan did not even need tarp. they were forced to take it. paid it back with outrageous interest. its not fair for people like you to go around acting like you only want fairness. there is nothing fair here.
    21 Oct 2013, 08:34 AM Reply Like
  • al roman
    , contributor
    Comments (4613) | Send Message
     
    A Dang Shame.
    20 Oct 2013, 01:37 AM Reply Like
  • Morrison Marketing
    , contributor
    Comments (96) | Send Message
     
    Can somebody tell me why JPM has to pay the government?

     

    This is like someone stealing your bike and then the government steals it from them.

     

    It makes no sense, but who cares, sense is overrated.
    20 Oct 2013, 02:00 AM Reply Like
  • al roman
    , contributor
    Comments (4613) | Send Message
     
    Yes Sir.
    20 Oct 2013, 07:27 AM Reply Like
  • Tom Shaughnessy
    , contributor
    Comments (1105) | Send Message
     
    They should have settled...

     

    http://seekingalpha.co...
    20 Oct 2013, 02:08 AM Reply Like
  • spinrbait
    , contributor
    Comments (341) | Send Message
     
    no one will be prosecuted because no one did anything illegal. the crooks already had their millions in bonuses, then walked away from fannie and freddie, while both agencies quit paying interest on their AAA rated preferred stock. wiping out retirees. what did franklin rainnes walk away with? 14 million dollar bonus. and what to we hear from the occupy mob? crickets. or put dimon in prison.
    20 Oct 2013, 06:54 AM Reply Like
  • al roman
    , contributor
    Comments (4613) | Send Message
     
    And the Crickets tell us winters coming,Hopes & Dreams.
    20 Oct 2013, 07:36 AM Reply Like
  • montpellier
    , contributor
    Comments (23) | Send Message
     
    This bank will have another sizeable loss in 2014. Risk within the bank is not taken seriously. They try to make the job more difficult than what it actually needs to be. Pull back on these silly standard deviation calcs and look at the industry risk. When I hear a banker talk about right way or wrong way risk I just get the feeling they know little about the industry (commodities, real estate, autos etc....). As these costs add up we hear less about how big the bank is and $6b can be covered easily.
    20 Oct 2013, 10:26 AM Reply Like
  • dogman10
    , contributor
    Comments (32) | Send Message
     
    Maybe the Fed keeps spoon feeding the big banks so they can pay fines.
    20 Oct 2013, 11:42 AM Reply Like
  • Hendershott
    , contributor
    Comments (1498) | Send Message
     
    So much for all that money they made doing warehouse lending and securitizing crap loans. The government gets paid because they had to pay off Deutsche Bank et al for buying the securitized junk from JPM and it's ilk.
    20 Oct 2013, 12:34 PM Reply Like
  • J Collins
    , contributor
    Comments (178) | Send Message
     
    If a corporate entity is willing to pay a fine to the tune of $13 billion, it is reasonable to speculate about the magnitude of wrong doing that was originally at play.
    20 Oct 2013, 12:40 PM Reply Like
  • BGP45
    , contributor
    Comments (2) | Send Message
     
    WHAT is this doing to the stockholders and the dividend?
    20 Oct 2013, 02:41 PM Reply Like
  • kathycates
    , contributor
    Comment (1) | Send Message
     
    Disgusting! Begging for an affordable loan mod - run around for years. What gave them the right to put my loan in a pass through security that never made it to the trust? Who is my payment golng to? They do not know and I certainly know that WAMU isn't around to answer the question!
    20 Oct 2013, 03:13 PM Reply Like
  • buffett's_apprentice
    , contributor
    Comments (46) | Send Message
     
    BGP, probably nothing. JPM earns over 20B/year and growing plus the legal reserve stood at 23B as of Q3... they (stockholders) won't even feel the bite. I would actually expect a div raise and an increased share buyback authorization in March 2014.

     

    Long JPM
    20 Oct 2013, 04:17 PM Reply Like
  • june1234
    , contributor
    Comments (2499) | Send Message
     
    The $13B represents 13% of JPMs $100B 2012 revenues, cost of doing business. JPMs business partner the gov. is happy too
    20 Oct 2013, 06:50 PM Reply Like
  • buffett's_apprentice
    , contributor
    Comments (46) | Send Message
     
    The funny thing here is uncle sam "advised" them to take bear sterns and wamu over and now they're suing them over the MBS that those companies (not JPM) sold. Clearly not fair but luckily Jamie's attitude is to just settle this because let's face it, JPM won't win a lawsuit against the DOJ especially when you consider the London whale shenanigans that went down last year.

     

    Takeaway: shareholders be happy this is behind us and look forward to the future (and already prevalent) earnings power of JPM
    20 Oct 2013, 07:30 PM Reply Like
  • nafar
    , contributor
    Comments (217) | Send Message
     
    What i do not understand why in the first place JPM lends money knowingly they are not good mortgagaes and have to sell these after bundling them to investors. Had the markt did not fall that drastically, then these very securities were good. Once I read that if these sold securities would loose value, then the seller would compensate the loss. Can anyone explain what wrong JPM did?
    20 Oct 2013, 07:28 PM Reply Like
  • bobbyd61
    , contributor
    Comments (38) | Send Message
     
    im placing my order to buy now
    20 Oct 2013, 07:38 PM Reply Like
  • june1234
    , contributor
    Comments (2499) | Send Message
     
    A $13b that represents 13% of JPMs 2012 revenues of $100B, cost of doing business. JPM's business partner the gov is happy too.
    20 Oct 2013, 07:42 PM Reply Like
  • Morrison Marketing
    , contributor
    Comments (96) | Send Message
     
    What do people use JP Morgan for? I know, I am just asking what purpose do they serve for your guys needs)

     

    I find much better transparency and lower fees for my clients with small investment managers, PM's and CFA's and such, I do not see why you would want a JPM account beyond the volume guys.

     

    Big banks do not do loans anymore, regional banks do all the time, at good enough rates and fees.

     

    They all are always working and being as inhuman as possible, no emotion, no care, only money, money, money, money, money, money. I feel like they live very sad and unfulfilled lives.
    20 Oct 2013, 10:05 PM Reply Like
DJIA (DIA) S&P 500 (SPY)
ETF Tools
Find the right ETFs for your portfolio:
Seeking Alpha's new ETF Hub
ETF Investment Guide:
Table of Contents | One Page Summary
Read about different ETF Asset Classes:
ETF Selector

Next headline on your portfolio:

|