#AceFinanceNews – UNITED STATES (Wall Street) – July 16 – Bank of America has offered to pay $13 billion to settle an investigation into its sales of mortgage-backed securities (MPA)
Citing people familiar with the matter, the Wall Street Journal reported that the bank met with the Justice Department Tuesday. The meeting did not yield any progress toward a final deal, however.
Bank of America had previously offered $12 billion to settle the probe. The DOJ countered with a $17 billion settlement, according to Reuters.Talks between the bank and the government have been acrimonious. Bank of America CEO Brian Moynihan requested to meet with Attorney General Eric Holder last month to hash out a deal, but Holder refused, saying the parties were too far apart for the talks to be productive.
At $13 billion, the bank’s offer would equal the payoutagreed to last year by JPMorgan. That settlement was the largest with a single entity in US history.
(IBTimes October 20 2013) Reported that JPMorgan has agreed to pay one of the largest financial penalties in history after sealing a tentative $13bn deal with the US Department of Justice to put an end to a raft of government mortgage product related probes.According to sources cited by Reuters, although JPM has reached a bumper deal with authorities, the investment banking giant is not free of criminal liability and will have to continue to cooperate in criminal inquiries into individuals involved in the conduct at issue.At the beginning of the month, JPM’s chief executive Jamie Dimon met US Attorney General Eric Holder to thrash out an original $11bn (£6.8bn, €8bn) deal to end the raft of mortgage-securities investigations in the investment bank.The bank already stumped up nearly $1bn in fines related to the London Whale trading scandal, which has cost the bank billions of dollars in legal losses.
On the same day JPM was ordered to refund $300m to customers after US regulators ruled that two million clients were harmed by the bank’s debt collection and other credit card practices.
Regulators also said that there were errors in the way the investment bank pursued customers through the court. However the refund order is not a fine, so regulators and prosecutors can still slap JPM with financial penalties in the future.
Only a few days ago, JPM revealed being hit by $9.2bn worth of legal expenses which resulted in the US banking giant posting its first ever quarterly loss under chief executive Dimon.
The legal expenses, which worked out as $7.2bn after taxes, include money JPM is setting aside for future settlements with authorities.
“While we expect our litigation costs should abate and normalise over time, they may continue to be volatile over the next several quarters,” said Dimon in a statement.
JPM was not ready to avail for comment at the time of publication.
Dismissed U.S. attorneys summary (Photo credit: Wikipedia)
Because the deal was still in the works, the details of JP Morgan‘s record $13 billion fine to settle civil violations related to mortgage-backed securities it sold before the housing crisis have been murky.
But now the WSJ has the break down.
For the record, the Justice Department has decided not to make JP Morgan pay punitive damages for mortgages sold by Bear Stearns and Washington Mutual, since JPM essentially helped the government out by buying the banks as they were collapsing.
So that’s nice, but the figure will still stay at $13 billion.
Now for the numbers:
- $4 billion will go to Fannie Mae and Freddie Mac
- $4 billion will go to underwater homeowners
- $3 billion will go to institutional investors that lost money on bad mortgage-backed securities
- and $2 billion will serve as a penalty for JPM’s conduct in the lead up to the financial crisis
According to the WSJ, all the drama surrounding this deal started on September 24th, the day the DOJ set a deadline to file a civil suit against the bank over MBS. The day before, JPM called and offered $3 billion, which the DOJ refused.
The JPM called back and said they’d negotiate a higher figure if they didn’t have to go to Court.
That brings us to now. After the government shut down ended, lawyers at the DOJ told JP Morgan they had six days to cobble an agreement together. What that means is that we could have a finalized agreement by this week.
For the full story, head to the WSJ>