JPMorgan Reaches Tentative Deal On Mortgage Charges

The Justice Department is on the verge of a $13 billion settlement with JPMorgan Chase. That would make it the biggest settlement ever announced involving a single company. NPR's Chris Arnold tells host Rachel Martin the negotiations involved the allegedly improper sale of mortgage securities, and the deal would only resolve civil charges against the company, not criminal ones.

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RACHEL MARTIN, HOST:

The U.S. Justice Department is on the verge of a $13 billion settlement with JPMorgan Chase. That would make it the largest settlement ever involving a single company. JPMorgan was being investigated for sales of mortgage-backed securities, going back to the fraud-ridden days of the housing bubble. NPR's Chris Arnold has been following all this. He joins us now. Hi, Chris.

CHRIS ARNOLD, BYLINE: Hey, Rachel.

MARTIN: So, tell us more about the settlement. What do we know? What is the gist of it?

ARNOLD: Well, a source tells NPR that the outlines of this deal was hammered out in a Friday night phone call that involved both JPMorgan CEO Jamie Dimon and U.S. Attorney General Eric Holder. The details are still getting worked out, but we expect this to move forward. In a word or two, this is bout bad mortgages. And you remember back during the housing bubble, there was a lot of shady lending and fraud. There was a whole class of mortgages called liars loans.

And these investigations into JPMorgan involve the bank's role in securitizing those, packaging those up and selling them off to investors. And the allegation is basically that, well, look, the bank knew that the loans were garbage but they said that they were good investments, and that's kind of the crux of the case. And this settlement settles the civil charges there.

MARTIN: So, civil charges are being resolved. What about potential criminal charges?

ARNOLD: That's a very good question and that's a key part of this that's in some ways a bigger deal. The criminal charges will go forward, and people can go to jail if convicted in a criminal case. We know that there is at least one criminal investigation coming out of the U.S. Attorney's office in Sacramento. Now, criminal prosecutions have been very rare in the wake of the financial crisis. The government has faced some criticism over that. And, of course, JPMorgan was looking to avoid any criminal prosecution as part of this settlement. But another source tells NPR that in an earlier conversation, U.S. Attorney General Eric Holder again, speaking with Jamie Dimon, he said directly that that was, quote, "a nonstarter." So, the criminal probe will continue. And that's one of the things actually that has this being seen as a win for the government.

MARTIN: Chris, JPMorgan had been seen as an example of a really well-managed bank, but it's had deal with a host of other settlements and allegations lately. How will JPMorgan weather all of this? Can the bank recover from these hits to its reputation?

ARNOLD: That's right. There were big fines in the so-called London Whale trading debacle, you'll probably remember. Also fines related to energy trading, allegations of improper hiring of the children of Chinese officials, these mortgage cases, and the list actually goes on longer than that. The thing is Jamie Dimon for a long time was thought of as America's greatest banker. And he didn't lose his job in the wake of financial crisis like other CEOs did. But the bank has now just suffered its first quarterly loss in 10 years. So, that's bad, and that's due to all these settlements. And all this is, you know, it has to be taking the shine off of Jamie Dimon, if you will. But who knows? I mean, maybe the bank can put all these lawsuits behind it, maybe not. There's that criminal investigation. We'll just have to see.

MARTIN: NPR's business correspondent Chris Arnold. Chris, thanks so much for talking with us.

ARNOLD: Thank you, Rachel.

(SOUNDBITE OF MUSIC)

MARTIN: And you're listening to NPR News.

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