JP Morgan Chase Settles with Justice Department for $13-Billion

It appears that the major objective is to admit to no wrongdoing and as usual, the payment of cash seems to be the caveat that allows the practice to exist. Since the financial crisis of 2008, caused chiefly by the housing bubble bursting due to multiple major European banks and those located here in the US, not one bank executive or employee of any standing has been convicted and sent to prison for allegations that cost homeowners trillions of dollars in total losses due to their actions. But now, after hundreds of legal settlements that have all let criminal offenders off the hook, US government officials may finally be preparing to charge those that have committed banking offenses.

Last month, in a case dubbed the London Whale scandal, which is not connected to the 2008 banking crisis, for the first time since the events that led the country into a deep recession occurred, two bank employees have been charged with criminal actions. The charges include regulatory filings to conceal an enormous investment loss that their department was sustaining in addition to falsifying bank records. This particular case is the first of its kind that not only requires JP Morgan Chase to pay a $750 million fine but for the first time, is allegedly requiring the bank to admit to some type of criminal misconduct, in order to settle the case with regulators, both in the US and UK. If these acts are prosecuted when the settlement is decided, it would be virtually an unprecedented result.

But the London Whale monetary implications pales in comparison to the $13 billion proposed settlement that will be announced within a few days of the now tentative agreement reached between JP Morgan Chase and the Justice Department. This disbursement surrounding the quality of mortgage-backed securities sold in the run-up to the 2008 financial crisis will be the largest sum ever agreed upon in a settlement of this type. $4 billion of the bulk amount will go to consumer assistance for besieged homeowners that suffered losses due to the purchase of the mortgage-backed securities and $9 billion will be assessed in fines and/or penalties.

Additionally, for the first time in a case relating to any that pitched the nation's economy into the most intense recession suffered since the 1930s Great Depression, criminal charges most likely will be pursued. Under the proposed conditions, JP Morgan gave way to its firm submission demanding the Justice Department to accept a non-prosecutorial agreement. This now sanctions the criminal portion of the investigation pertaining to the bank's conduct, which is being handled by federal prosecutors to continue, according to an individual who is privy to the ongoing investigation and was interviewed by a CBS News reporter this past weekend. The federal prosecution is being looked into by the Sacramento, California federal prosecutor's office.  This same source stated that the bank also agreed to afford its assistance in any investigations against individuals in the company's employ. They also asserted their knowledge that the prospective settlement was sealed on Friday during a phone call that occurred at approximately 6 p.m., between Attorney General Eric Holder and JP Morgan Chairman Jamie Dimon in tandem with the bank's attorneys.

Since the crisis in 2008, JP Morgan has settled numerous cases against them but none concluded with any type of criminal prosecution. Over the past three years the list of fines and penalties paid by the bank stretch into the billions. Some of the major settlements and fines sustained by the bank are listed below

In 2011 the bank was evicting guiltless individuals by foreclosing on homes that were not in violation of eviction criteria. This led to a $56 million settlement. Also in that year, the bank was fined $153 million for recommending and selling investment vehicles to its customers while the bank was investing against them. Continued wrongdoings continued in that year when the bank was fined $229 million for a ruse that rigged the state municipal bond bidding market. This action defrauded taxpayers in over 30 states. JP Morgan was also held accountable for doing business with countries that were under embargos set by the US government such as Iran, Cuba, Liberia and the Sudan. This time the bank paid $88 million in fines for those actions but no criminal prosecution was pursued.

In 2012 JP Morgan was slammed with a $5 billion penalty in a suit that was based on what was defined as faulty foreclosure processing, shoddy loan servicing, and illegal robo-signing that had supposedly been going on for a significant period of time. The bank also paid a $110 million fine in that year for what is ordinarily acknowledged as check sequencing. This can be defined as a method of instead of processing customers' debits and credits based on the chronological order in which they occurred, accounting went back periods of time into past transactions which re-sequenced them in whatever classification that would make the holder of the accounts' liquid assets diminish to the point that the amount of money remaining was less than the amount required to cover amounts to be debited. This endorsed the bank to charge fees for insufficient funds and overdrafts. Relating to the economic crash, also in 2012, JP Morgan refunded $150 million to pension funds and other investors who lost large amounts of money that was invested with them during the economic meltdown.

The bank also agreed to an almost $300 million settlement with the Securities and Exchange Commission for what is considered by critics to be the actual cause of the housing collapse of 2008 and the consequential economic collapse that hurdled the country into recession. The bank misled investors about the value of mortgage-backed securities that the bank created and was selling to investors which the bank knew were actually of little worth or valueless at the time.

This year a total of ten banks, including JP Morgan Chase, were required to repay a collective $8.5 billion to unjustly swindled homeowners that were foreclosed upon. JP Morgan also had to repay $546 million to clients of MF Global after the frenzied days of its criminal downfall. It was reported that the CEO of MF Global along with former NJ Governor Jon Corzine ransacked the accounts of its customers shortly before the firm's collapse in order to pay the company's debts to banks such as JP Morgan. Add the London Whale scandal and the current thirteen billion dollar settlement that is nearly concluded finds the amount of monies paid out in settlements and fines nearly beyond comprehension.

JP Morgan is not the only major financial institution whose involvement most likely caused the economic crisis and has since been paying major fines and settling class action suits and government backed actions.

In May 2012, a Deutsche Bank mortgage division agreed to pay over $200 million in settlement of one of the biggest U.S. government civil fraud lawsuits over reckless mortgage loaning practices. On July 19 2012 Goldman Sachs agreed to a class action settlement of $698 million relating to mortgage-backed securities. On August 29, 2012 Citigroup agreed to pay almost $600 million to settle a class-action lawsuit brought by stockholders who maintained that they were deceived about the bank's exposure to subprime mortgage obligations days before the financial crisis began. In March, Citigroup also agreed to pay in excess of $700 million to settle claims for misleading investors over its exposure to subprime mortgages in its bonds and preferred stock offerings. This was the second-largest class action disbursement derived from the financial crisis. And just last month, Citigroup announced an agreement to pay Freddie Mac almost $400 million to settle claims of likely defects in millions of mortgages that was sold to them. The government backed institution has contended that Citi and other banks sold it loans that did not meet fundamental standards.

Also, just a few days ago a Deutsche Bank unit has reached an $11 and a half million settlement that decided a nearly two-year inquiry into its part in the funding of subprime mortgage loans in the state of Nevada.