WASHINGTON (AP) — JPMorgan Chase & Co. has agreed to pay $13 billion in a landmark settlement and acknowledged that it misled investors about the quality of risky mortgage-backed securities ahead of the 2008 financial crisis.
The settlement announced yesterday with the Department of Justice is the largest ever between the U.S. government and a corporation. It also included settlements with New York, California and other states.
JPMorgan was among the major banks that sold securities that plunged in value when the housing market collapsed in 2006 and 2007. Those losses triggered a financial crisis that pushed the economy into the worst recession since the 1930s.
The deal was reached after months of negotiations and could serve as a template for similar settlements with other big banks. As part of the deal, JPMorgan agreed to provide $4 billion in relief to homeowners affected by the bad loans. The bank also acknowledged that it misrepresented the quality of its securities to investors.
“Without a doubt, the conduct uncovered in this investigation helped sow the seeds of the mortgage meltdown,” Attorney General Eric Holder said. “JPMorgan was not the only financial institution during this period to knowingly bundle toxic loans and sell them to unsuspecting investors, but that is no excuse for the firm’s behavior.”
JPMorgan will pay $2 billion in civil penalties to the federal government and about $1 billion to New York state. Another $6 billion will go toward compensating investors.
In a statement, JPMorgan CEO Jamie Dimon said that the settlement covers a “very significant portion” of the banks troubled mortgage-backed securities, as well as those it inherited when it purchased Bear Stearns and Washington Mutual in 2008.
“We are pleased to have concluded this extensive agreement with the (government) and to have resolved the civil claims of the Department of Justice and others,” Dimon said in the statement.