JP Morgan fined $13,000,000,000

Tim Wallace
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JP Morgan agrees record fine but could still face criminal claims

JP MORGAN is facing a record $13bn (£8bn) bill to settle mortgage market claims with US regulators this week – but even the record payment is not expected to be enough to stop criminal cases being brought.

The unprecedented payment is expected to cover government charges and some compensation payments to firms and investors who bought mortgage-backed securities from Bear Stearns and Washington Mutual.

JP Morgan acquired those firms in the financial crisis.

But the bank’s boss Jamie Dimon failed to convince regulators that the bumper payment should end criminal claims too.

That means the bank – and possibly individual former staff – could still be open to cases from aggrieved buyers of the securities in the run up to the financial crisis.

On Friday JP Morgan revealed it has set aside $23bn to cover litigation costs on a range of ongoing cases, and warned investors could reasonably expect another $5.7bn to be required on top of that.

“We continuously evaluate our legal reserves, but in this highly charged and unpredictable environment, with escalating demands and penalties from multiple government agencies, we thought it was prudent to significantly strengthen them. While we expect our litigation costs should abate and normalise over time, they may continue to be volatile over the next several quarters,” Dimon warned on Friday.

“The board continues to seek a fair and reasonable settlement with the government on mortgage-related issues – and one that recognises the extraordinary circumstances of the Bear Stearns and Washington Mutual transactions, which were undertaken at the request or encouragement of the US government.”

Dimon is believed to have agreed the $13bn deal in late night meetings with the Department of Justice (DoJ) over the weekend.

Dimon was pictured in September entering the DoJ, but the negotiations were slowed by the US government shutdown.

The bank has a series of other cases ongoing, which make up the remainder of the $23bn set aside.

Meanwhile US housing regulator the Federal Housing Finance Agency (FHFA) is looking to fine Bank of America more than $6bn for its role in misleading mortgage agencies during the housing boom, the Financial Times reported last night, citing people familiar with the matter.

JP Morgan declined to comment, while Bank of America could not be reached last night.