JPMorgan in tentative $13 bln deal with U.S. Justice Dept -source

Reuters

By Aruna Viswanatha

WASHINGTON, Oct 19 (Reuters) - JPMorgan Chase & Co has reached a tentative $13 billion agreement with the U.S.Justice Department to settle government agency investigationsinto bad mortgage loans the bank sold to investors before thefinancial crisis, a source said on Saturday.

The tentative deal does not release the bank from criminalliability for some of the mortgages it packaged into bonds andsold to investors, a factor that had been a major sticking pointin the discussions, the source said.

As part of the deal, the bank will likely cooperate incriminal inquiries into certain individuals involved in theconduct at issue, the source, who declined to be identified,said.

Officials at JPMorgan and the Justice Department declinedto comment.

Another source close to the discussions characterized a dealas likely, but cautioned that parts of the agreement are stillbeing hammered out, and the settlement could conceivably fallapart.

The record settlement could help resolve many of the legaltroubles the New York bank is facing. Earlier this monthJPMorgan disclosed it had stockpiled $23 billion in reserves forsettlements and other legal expenses to help cover the myriadinvestigations into its conduct before and after the financialcrisis.

The deal is being hammered out by some of the most seniorofficials at the Department of Justice and the largest U.S.bank. Attorney General Eric Holder and JPMorgan Chief ExecutiveJamie Dimon spoke on the phone on Friday night to finalize thebroad outlines of the broad deal, the first source said.

The bank's general counsel Stephen Cutler and AssociateAttorney General Tony West are negotiating a statement of factsthat will be part of a final agreement, the source said.

Long considered one of the best-managed banks, JPMorgan hasstumbled in recent years, with run-ins with multiple federalregulators as well as authorities in several states and foreigncountries over issues ranging from multibillion-dollar tradinglosses and poor risk controls to probes into whether itmanipulated a power market.

In September, as the Justice Department prepared to sue thebank over mortgage securities that the bank sold in the run-upto the financial crisis, JPMorgan tried to reach a broadersettlement with DOJ and other federal and state agencies toresolve claims over its mortgage-related liabilities stemmingfrom the bust in house prices.

Dimon went to Washington to meet with Holder on Sept. 25,and discussed an $11 billion settlement at that point.

Some of the problems relate to mortgage bank WashingtonMutual and investment bank Bear Stearns, two failing firms thatJPMorgan took over in 2008.

The bank and the Justice Department have been discussing abroad deal that would resolve not only the inquiry into mortgagebonds it sold to investors between 2005 to 2007 that were backedby subprime and other risky residential mortgages, but alsosimilar lawsuits from the Federal Housing Finance Agency, theNational Credit Union Administration, the state of New York andothers.

The broader settlement is a product of a government workinggroup created nearly two years ago to investigate misconduct inthe residential mortgage-backed securities market thatcontributed to the financial crisis. Officials from the JusticeDepartment, the New York Attorney General and others helped tolead the group.

Reuters reported late Friday that JPMorgan and FHFA hadreached a tentative $4 billion deal. That agreement is expectedto be part of the larger $13 billion settlement.(Full Story)

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