Jamie Dimon’s $11bn day out

Tim Wallace
Follow Tim

JP Morgan boss heads to Washington for settlement talks

JP MORGAN boss Jamie Dimon met Justice officials in Washington DC yesterday, travelling down from New York to hammer out the final details of the bank’s bill to settle mortgage investigations.

The lender is facing the biggest ever fine levied on a bank, with officials thought to have pushed for an $11bn (£6.9bn) bill covering fines and consumer settlements.

JP Morgan is accused of misrepresenting the quality of mortgage backed bonds it sold to Fannie Mae and Freddie Mac before the crisis, which led to huge losses for the government-backed agencies.

Dimon’s face-to-face visit is the latest stage in the lengthy negotiations and a sign a deal is close – the settlement is likely to be finalised in the coming days.

The bank is thought to have pushed back against the scale of the claims. Some of its woes are from Washington Mutual and Bear Stearns, bought during the crisis. Those purchases could be a sticking point with officials from the Department of Justice, the New York Attorney General and the other regulators involved.

JP Morgan was encouraged to buy the failing institutions by the authorities, hoping to stabilise the financial sector.

Although the bank bought the institutions knowing it had to deal with their problems, it may regard paying big fines on behalf of those lenders as unfair, and fight the specific fines.

Talks could also become stuck around payments to consumers, as the payouts to customers could be politicised. And the bill will not just come from the settlement with regulators – Dimon wrote to staff last week to reveal the bank has spent more than $1bn extra this year on compliance, in part by hiring 4,000 control staff since the start of 2012. They cover areas like compliance and risk and will be an ongoing cost.

JP Morgan would not comment.