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JPMorgan agrees to $13 billion mortgage settlement
November 19, 2013

JPMorgan has agreed to a $13 billion settlement over mortgage-backed securities sold ahead of the financial crisis, officials announced Tuesday.

The Justice Department called the agreement “the largest settlement with a single entity in American history.”

“Without a doubt, the conduct uncovered in this investigation helped sow the seeds of the mortgage meltdown,” Attorney General Eric Holder said in a statement.
As part of the agreement, JPMorgan admitted to making “serious misrepresentations” to investors in mortgage-backed securities, the Justice Department said.

Bank executives were at pains to emphasize that they had not admitted to any specific violation of the law during a conference call with analysts Tuesday. Such an admission would provide ammunition for private lawsuits.

JPMorgan CEO Jamie Dimon said in a statement the firm was “pleased to have concluded this extensive agreement.”

The case is the latest in a series of legal headaches for JPMorgan, the country’s largest bank by assets.

Last week, JPMorgan announced a $4.5 billion settlement with institutional investors who suffered losses on bubble-era mortgage securities. The firm has paid over $1 billion in fines in connection with last year’s “London Whale” trading debacle, and $80 million more over alleged unfair credit card billing practices.

In July, the bank agreed to pay $410 million to settle charges that it manipulated electricity prices in California and the Midwest. It is also facing scrutiny over its hiring practices in China and its alleged involvement in the Libor rate-fixing scandal.

JPMorgan posted a loss for the third quarter based on its massive legal expenses. Dimon called the loss “painful” and warned that litigation costs could continue to be a drag on earnings for several quarters.

The bank said at the time that it was holding $23 billion in reserve for potential litigation expenses, but that its legal costs could be nearly $6 billion more than that in a worst-case scenario.

While JPMorgan is shelling out a staggering amount of money, the bank is large enough to absorb the costs. It booked $21.3 billion in net income for 2012, and has assets of $2.5 trillion.