JPMorgan Chase's record US$13 billion deal to end US probes of its mortgage-bond sales would free America's largest bank from mounting civil disputes with the government while leaving a criminal inquiry unresolved.
The tentative pact with the Department of Justice increased from an US$11 billion proposal last month and would be the most paid by a financial firm in a settlement with the US. The deal would not release the bank from potential criminal liability, at the insistence of US Attorney General Eric Holder, according to terms described by a person familiar with the talks.
"To not get the waiver from criminal prosecution is not good," said Nancy Bush, a bank analyst. "What we're looking for in a settlement of this size is certainty from things like the criminal prosecution of a company. The Street wants certainty."
JPMorgan chief executive Jamie Dimon discussed the deal with Holder after markets closed on Friday as the banker sought to end probes that have beset his firm and resulted in its first quarterly loss under his watch. The agreement, which is not yet final, includes US$4 billion in relief for unspecified consumers and US$9 billion in payments and fines, according to another person briefed on the terms.
The payouts would cover a US$4 billion accord with the Federal Housing Finance Agency over the bank's sale of mortgage-backed securities, that person said. The deal also resolves pending inquiries by New York Attorney General Eric Schneiderman, the people said.
The settlement would amount to more than half of JPMorgan's record US$21.3 billion profit last year, or 1.5 times what was set aside to pay employees during the first nine months of this year.
The outline of the tentative accord was reached during a telephone call between Holder, Dimon, JPMorgan general counsel Stephen Cutler and Associate US Attorney General Tony West.
Holder told Dimon that a release from the criminal inquiry would not be forthcoming, said the person familiar with their talks. The accord will probably require JPMorgan to co-operate in criminal investigations of individuals tied to wrongdoing associated with the bank's mortgage practices, they said.
JPMorgan's push to settle the mortgage probes and other cases required a US$7.2 billion charge in the third quarter, causing the bank to report a US$380 million loss on October 11.