The US Department of Justice (DOJ) [official website] on Tuesday announced [press release] that a $13 billion civil settlement with JPMorgan & Co. [corporate website; JURIST news archive] has been finalized, resolving federal and state claims arising from the bank's risky mortgage practices which helped lead to the 2008 financial crisis. It is the largest settlement paid by a single company in American history. Included in the settlement is a statement of facts [text, PDF], in which JPMorgan admitted that bank employees for JPMorgan, Bear Sterns and Washington Mutual knew that the loans did not comply with guidelines, but they allowed the loans to be securitized, and those securities to be sold, without disclosing this information to investors. "Without a doubt, the conduct in this investigation helped sow the seeds of the mortgage meltdown," Attorney General Eric Holder [official website] stated.
JPMorgan was not the only financial institution during this period to knowingly bundle toxic loans and sell them to unsuspecting investors, but that is not excuse for the firm's behavior. The size and scope of this resolution should send a clear signal that the Justice Department's financial fraud investigations are far from over. No firm, no matter how profitable, is above the law, and the passage of time is no shield from accountability.The settlement does not absolve JPMorgan or any individual employees from possible criminal charges. JPMorgan is also required to pay out $4 billion of the settlement in the form of relief to aid consumers harmed by the unlawful conduct of JPMorgan, Bear Sterns and Washington Mutual. This relief may include "principal forgiveness, loan modification, targeted originations and efforts to reduce blight." JPMorgan must comply with the terms in the settlement by Dec. 31, 2017.
JPMorgan has been under intense scrutiny by US government agencies in the aftermath of the sub-prime mortgage crisis. In August the company disclosed [JURIST report] in its quarterly filing with the Securities and Exchange Commission (SEC) [official website] that it is being investigated by both the civil and criminal divisions of the US Attorney's Office for the Eastern District of California (EDC) [official website] over sales of mortgage-backed securities to investors leading up to the sub-prime mortgage crisis. JPMorgan's disclosures came one day after the DOJ filed suit [JURIST report] against Bank of America (BOA) [corporate website], claiming the corporation misled investors about securitized loans worth more than $850 million. In an announcement earlier that week, Attorney General Eric Holder remarked [press release] that the suit against BOA prove that the Financial Fraud Enforcement Task Force [official website] is taking an aggressive approach to uncovering abuses in the residential mortgage-backed securities market.